A Welfare Based Estimate of “Real Feel GDP” for Europe and the USA

This paper attempts to define and compute a “Real Feel GDP”, by analogy with meteorologist’s Real Feel Temperature. It is in such terms that we interpret a standard Kolm-Atkinson social welfare function, estimated with life-satisfaction micro data reported in Euro-SILC surveys. Using long run World Inequality Lab distributional data, we find that USA haven’t seen any improvement of our Real Feel GDP for the past 40 years, meaning that economic growth did not result in a better aggregate monetary well-being. In the meantime, in most European countries, except over the recent years, Real Feel GDP and GDP evolved similarly. We also find that economic downturns have lasted much longer than measured by GDP. Indeed, US Real Feel GDP took 10 years to recover its pre- crisis level after the second petrol shock; almost 10 years after the 2008 downturn, European Real Feel GDP had not yet recovered its pre-crisis level.