Assessing local-scale inclusive wealth: a case study of Sado Island, Japan

Present trends of urbanization are accompanied by increasing demographic and economic shrinkage of rural regions. In countries such as Japan, these rural regions trail behind metropolitan counterparts according to GDP, the conventional measure used to guide governmental policies. Yet, past research suggests that these regions may be undervalued. Further, the Inclusive Wealth Index (IWI), largely only used at the national level, may be able to capture aspects previously missed. As such, our study attempts to highlight the wealth of rural regions by comparing the inclusive wealth of Sado Island and Japan between 1990 and 2014. Minor methodological modifications were made according to data availability at the local level and to improve the accuracy of human capital estimations. Results captured the ongoing shrinkage of Sado and demonstrate the distinct potential of the IWI as a stock measure. Sado’s per capita wealth was about 10% lower than the national averages, but its natural capital was about threefold national averages. Supplementary estimations of the natural capital of fisheries and cultivated forests suggest that inclusion of additional factors in the evaluation would further increase the relative valuation of rural regions. We discuss implications of our estimations for wellbeing, and conclude with a critical appraisal of the IWI calculation towards policy implementation of the index.