The World Bank's ‘genuine savings’ measure and sustainability

In order to consider the depletion of natural capital in national income accounting, the World Bank has developed a composite indicator known as ‘genuine savings’ incorporating several environmental indicators. This paper examines the conceptual and empirical characteristics and policy implications of the measure. Analysis shows that the measure is conceptually and empirically imperfect. The policy implications based on this measure are erroneous. The paper suggests that a global approach is needed to appropriately address sustainability issues and to incorporate natural capital in national accounting.