Beyond GDP: Productive Capacity, Labor-Income Transmission, and Distributional Inclusiveness — A Balanced Prosperity Index for OECD Economies

GDP per capita measures aggregate output but does not indicate how much of that output reaches workers through earnings, nor whether the resulting prosperity is broadly shared. This paper introduces the Balanced Prosperity Index (BPI), a composite indicator applied to 32 OECD economies that explicitly measures these two transmission gaps. BPI rankings diverge by three or more positions from GDP per capita rankings for 9 of 32 economies, with a mean absolute rank gap of 2.0 positions across the full sample; the largest divergences occur among high-output economies with weak labor-income transmission or high distributional concentration (most notably the United States (−6), the United Kingdom (−6), and Korea (−5)) where GDP per capita systematically overstates prosperity as materially experienced through the labor-income channel, and among capacity-constrained economies with efficient transmission such as the Slovak Republic (+8) where GDP understates it. The BPI integrates three analytically distinct dimensions: productive capacity (GDP per capita, PPP), labor-income transmission (average annual wages, PPP-adjusted), and distributional inclusiveness (inverse Gini coefficient on disposable income). These correspond to successive stages through which aggregate output is converted into broadly experienced material prosperity. The index is governed by three axiomatic design principles (necessity, monotonicity, and bounded compensability) and is defined as an admissible family of specifications rather than a single point estimate. Results are robust across all normalization schemes, weighting configurations, and balance-adjusted variants, with Spearman rank correlations exceeding ρ = 0.97 across all tested specifications. External validation confirms construct validity: BPI rankings correlate with PPP-adjusted median household disposable income at ρ = 0.958 (N = 30), with HDI at ρ = 0.881, and with IHDI at ρ = 0.848. The BPI is designed strictly as a descriptive and comparative tool for material economic prosperity anchored in the output-to-labor transmission channel. It does not measure welfare, subjective well-being, health, education, or environmental outcomes, and should not be evaluated against objectives it does not pursue.