Going regional: An index of sustainable economic welfare for Italy

• Computation of ISEW for Italy over the years 1999–2009.
• Regional ranking based on ISEW and GDP are compared.
• Poverty-adjusted consumption.

The Index of Sustainable Economic Welfare (ISEW) is a monetary measure of sustainability and economic welfare aimed at overcoming some of the limitations of the Gross Domestic Product (GDP). In particular it accounts for the value of externalities, for the distribution of income and for the natural resources depletion. Since its formulation in 1989 by Daly and Cobb, the ISEW has been calculated for a number of nations. More recently, there has been an increasing interest in assessing sustainable welfare also at sub-national levels.Following this trend, the aim of this paper is to provide an empirical application of the ISEW for Italy and for all its regions and macro-areas over the years 1999–2009. In particular, we compare the ranking of the Italian macro-areas and regions based on ISEW with the corresponding rankings based on GDP. This is the first empirical analysis in the literature that provides estimates and comparisons of the ISEW for all the Italian regions and macro-areas over a long period of time.Another important novelty of this paper concerns the introduction of a weighting scheme to adjust private consumptions based not only on inequality but also on poverty.Empirical results show substantial differences between the regional ranking based on ISEW and the traditional classification based on GDP, revealing, moreover, that the Italian regions are characterized by a high variability in terms of their sustainable and economic welfare.