Is GDP an appropriate indicator of sustainable economic development?

ABSTRACT IN ENGLISH: The System of National Accounts (SNA 1993, ESA 1995) as an internationally agreed framework for the compilation and presentation of economic data defines gross domestic product (GDP) as an overall indicator of economic growth. Accounting for the environment's contribution to the economy and human welfare was considered extremely difficult, requiring the resolution of intractable methodological problems and the generation of a large amount of data. Besides environmental aspects, GDP also fails to fully explain differences in overall satisfaction of the citizens and perception of quality of life and well-being. One of the most ambitious efforts to reform the calculation of an indicator of economic welfare is presented in Daly and Cobb (1989). They propose a GDP substitute, the Index of Sustainable Economic Welfare (ISEW) which, apart from the conventional national accounts data includes environmental variables and income distribution indicators. In this paper we apply the ISEW methodology to the Croatian economy and construct the index of sustainable economic welfare for Croatia in the period 2000-2010. Index of Sustainable Economic Welfare constructed for Croatia has not recorded significant differences in comparison to GDP trends. Until 2003, the ISEW index was below GDP and personal consumption. In period 2003-2006 ISEW recorded higher levels than GDP while in 2007 and 2008 both indices are moving in line. During the recession period, overall welfare has not decreased substantially because GDP drop is partially compensated by non-monetary activities with positive impact on household wellbeing. // ABSTRACT IN CROATIAN: Sustav nacionalnih racuna (SNA 1993, ESA 1995) predstavlja medunarodno usuglasen okvir za izradu i prikaz ekonomskih podataka, a kao temeljni pokazatelj ekonomskog razvitka i rasta koristi se bruto domaci proizvod (BDP). BDP prema svojoj definiciji ne obuhvaca ukupne ucinke ekonomskih transakcija na okolis i ne mjeri blagostanje pojedinaca buduci bi konstrukcija takvog pokazatelja zahtijevala rjesavanje slozenih metodoloskih problema i ukljucivanje brojnih dodatnih varijabli u obracun. BDP takoder ne objasnjava ukupne razlike u zadovoljstvu gradana i njihovu percepciju o kvaliteti zivota i blagostanju. U ekonomskoj literaturi kao jedan od najambicioznijih prijedloga za izracun indikatora koji bi bio primarno vezan uz mjerenje blagostanja najcesce se spominje rad Daly i Cobb (1989). Oni su pored BDP-a osmislili konstrukci