In SustAgeble, we are undertaking the work of compiling the Distributional National Accounts (DINA) for Finland. DINA is an international academic effort to improve the scope of national accounts to measure the distribution of income and wealth (see Piketty et al. 2018).
The goal of DINA is twofold. First, it aims to create a database of estimates of the distribution of incomes and wealth, compiled at the World Inequality Database. Second, it aims to make inequality measures consistent with macroeconomic figures produced by current national accounts measures worldwide.
The second aim means that to understand the full extent of inequality in Finland, we need exact data on who receives each part of national incomes. Preferably this would include the full extent of in-kind transfers, such as health care or subsidized housing. It would also include income streams that are not easily observed, such as retained earnings in firms. Allocating the whole of national income to each percentile would improve our current understanding of income inequality in Finland. Also, understanding wealth inequality is elusive to any straightforward approach and requires new data for a fuller picture.
In DINA, also international financial flows are newly scrutinized, for example, there is a serious effort to account for tax havens in national income measures. Although the undertaking is difficult, it regardless can give us an understanding of the significance of more secretive financial flows (Alstadsæter et al. 2018).
Finally, an ultimate and timely aim for DINA is to account for depletion of natural resources as part of capital depreciation. This approach will probably be fiercely debated and discussed. It is not clear yet whether we can really compare an extracted ton of iron ore to the wear and tear an industrial machine suffers during a year, but we intend to start tackling the issue. When not measured in national accounts, natural wealth might easily get overlooked.
Does it matter if we get a better set of indicators regarding these extensions to national accounts, including the distribution of income and wealth? As wide a set of indicators on the society is a prerequisite for good public policies in the current system. It is not only that unmeasured parts of the society get overlooked, but it is also that our few core measures, such as the employment rate and GDP, get too much and distorted focus. For example, when the employment rate improves, it creates a tax surplus for the public sector. Policy makers get excited and start creating jobs at any cost. Suddenly each now job costs the public sector, reversing the initial positive relationship. We not only need good indicators, but we also need a public administration that has the capacity to use those indicators.
Alstadsæter, A., Johannesen, N., and Zucman, G. (2018). Who owns the wealth in tax havens? Macro evidence and implications for global inequality. Journal of Public Economics, 162, 89–100.
Piketty, T., E. Saez, and G. Zucman (2018). “Distributional National Accounts: Methods and Estimates for the United States”. The Quarterly Journal of Economics 133.2, pp. 553–609.