Raising Happiness in Poorer
Countries: Will Economic
Growth Do the Job?
Richard A. Easterlin
October 2011
(With help from Laura Angelescu-McVey, Robson
Morgan, Heinz-Henry Noll, Anke Plagnol, Onnicha
Sawangfa, Malgorzata Switek, Jacqueline Smith Zweig)
1
Growth and Happiness
In less developed countries (LDCs) rapid
economic growth does not raise the growth
rate of Happiness.
2
Growth and Happiness
In less developed countries (LDCs) rapid
economic growth does not raise the growth
rate of Happiness.
This finding is the same as that for the
developed countries (DCs), and for eastern
European countries transitioning from
socialism to capitalism (TCs).
2
LDC Evidence
Long term trends in:
1.
17 Latin American countries, 1994-2006
(Latinobarometro)
3
LDC Evidence
Long term trends in:
1.
2.
17 Latin American countries, 1994-2006
(Latinobarometro)
9 countries, 15-33 years, scattered across three
continents (World Values Survey)
3
LDC Evidence
Long term trends in:
1.
2.
3.
17 Latin American countries, 1994-2006
(Latinobarometro)
9 countries, 15-33 years, scattered across three
continents (World Values Survey)
China, 1990-2010 (Real per capita income doubling
in less than 10 years)
3
China (1)
World Values Survey, 1990-2007
(scale 1-10)
(urban pop)
(total pop)
1990
2000
1995
2005
2010
(All things considered, how satisfied are you with your life as a whole these
days? Please use this card to help with your answer.)
1 ‘Dissatisfied’
2
3
4
5
6
7
8
9
10 ‘Satisfied’
4
China (2)
Gallup, 1997-2004
(1- 4 scale)
(Overall, how satisfied or dissatisfied are you with the way things are going
in your life today? Would you say you are: 4 = Very satisfied; 3 = Somewhat
satisfied; 2 = Somewhat dissatisfied; 1 = Very dissatisfied?)
5
China (3)
Gallup, 1999-2010
1-10 scale
0-10 scale
(Please imagine a ladder with steps numbered from 0 at the bottom to 10 at the top.
Suppose we say that the top of the ladder represents the best possible life for you,
and the bottom of the ladder represents the worst possible life for you. On which
step of the ladder would you say you personally feel you stand at this time?)
6
LT Relation
Q. If rapid growth of income
doesn’t in itself raise happiness,
can anything be done to increase
happiness?
7
LT Relation
Q. If rapid growth of income
doesn’t in itself raise happiness,
can anything be done to increase
happiness?
A. Public policy.
7
Some time series evidence from TCs
Note: No LT change in Life Satisfaction, 1990-1999
8
Satisfaction with various areas
(“domains”) of life: Former GDR
1990
1999
Positive changes: (pre-transition) (post-transition) Change
(0-10 scale)
Satisfaction with:
Environment
3.11
6.47
+3.36
9
Satisfaction with various areas
(“domains”) of life: Former GDR
1990
1999
Positive changes: (pre-transition) (post-transition) Change
(0-10 scale)
Satisfaction with:
Environment
3.11
6.47
+3.36
Goods availability
3.16
6.20
+3.04
9
Satisfaction with various areas
(“domains”) of life: Former GDR
1990
1999
Positive changes: (pre-transition) (post-transition) Change
(0-10 scale)
Satisfaction with:
Environment
3.11
6.47
+3.36
Goods availability
3.16
6.20
+3.04
Dwelling
6.93
7.36
+0.43
9
Satisfaction with various areas
(“domains”) of life: Former GDR
1990
1999
Positive changes: (pre-transition) (post-transition) Change
(0-10 scale)
Satisfaction with:
Environment
3.11
6.47
+3.36
Goods availability
3.16
6.20
+3.04
Dwelling
6.93
7.36
+0.43
Standard of living
6.34
6.63
+0.29
9
Satisfaction with various areas
(“domains”) of life: Former GDR
1990
1999
Positive changes: (pre-transition) (post-transition) Change
(0-10 scale)
Satisfaction with:
Environment
3.11
6.47
+3.36
Goods availability
3.16
6.20
+3.04
Dwelling
6.93
7.36
+0.43
Standard of living
6.34
6.63
+0.29
Household income
5.52
5.61
+0.09
9
Satisfaction with various areas
(“domains”) of life: Former GDR
1990
1999
Positive changes: (pre-transition) (post-transition) Change
(0-10 scale)
Satisfaction with:
Environment
3.11
6.47
+3.36
Goods availability
3.16
6.20
+3.04
Dwelling
6.93
7.36
+0.43
Standard of living
6.34
6.63
+0.29
Household income
5.52
5.61
+0.09
And yet…
9
Satisfaction with various areas
(“domains”) of life: Former GDR
1990
1999
Positive changes: (pre-transition) (post-transition) Change
(0-10 scale)
Satisfaction with:
Environment
3.11
6.47
+3.36
Goods availability
3.16
6.20
+3.04
Dwelling
6.93
7.36
+0.43
Standard of living
6.34
6.63
+0.29
Household income
5.52
5.61
+0.09
And yet…
Life Satisfaction
6.57
6.55
-0.02
9
Satisfaction with various areas
(“domains”) of life: Former GDR
(Pre-transition) (Post-transition)
Negative changes:
1990
1999
Change
Satisfaction with:
Health
6.62
6.20
-0.42
10
Satisfaction with various areas
(“domains”) of life: Former GDR
(Pre-transition) (Post-transition)
Negative changes:
1990
1999
Change
Satisfaction with:
Health
Work
6.62
7.23
6.20
6.48
-0.42
-0.75
10
Satisfaction with various areas
(“domains”) of life: Former GDR
(Pre-transition) (Post-transition)
Negative changes:
1990
1999
Change
Satisfaction with:
Health
Work
Childcare
6.62
7.23
7.54
6.20
6.48
6.48
-0.42
-0.75
-1.06
10
Satisfaction with various areas
(“domains”) of life: Former GDR
(Pre-transition) (Post-transition)
Negative changes:
1990
1999
Change
Satisfaction with:
Health
Work
Childcare
6.62
7.23
7.54
6.20
6.48
6.48
-0.42
-0.75
-1.06
Net balance
10
Satisfaction with various areas
(“domains”) of life: Former GDR
(Pre-transition) (Post-transition)
Negative changes:
1990
1999
Change
Satisfaction with:
Health
Work
Childcare
6.62
7.23
7.54
6.20
6.48
6.48
-0.42
-0.75
-1.06
Net balance
Life Satisfaction
6.57
6.55
-0.02
10
A check: Satisfaction with various
domains of life: Hungary
Domain
1992
1997
Change
(0-10 scale)
Standard of living
Household income
4.6
3.6
4.5
3.4
-0.1
-0.2
11
A check: Satisfaction with various
domains of life: Hungary
Domain
1992
1997
Change
(0-10 scale)
Standard of living
Household income
4.6
3.6
4.5
3.4
-0.1
-0.2
Health
Home
Work
6.4
7.1
7.4
5.8
6.5
6.7
-0.6
-0.6
-0.7
11
Lesson from TCs
Money (Material living level) isn’t everything.
Public policies regarding Family life, Health,
Job Security matter.
12
Does public policy matter?
13
Does public policy matter?
Point-of-time test: Compare European
countries with similar economic
conditions, but different policies –
Does Happiness differ?
13
European Countries with Similar
Economic Conditions, Different
Public Policies
Group A: Welfare States - Denmark, Sweden,
Finland
Group B: France, UK, Germany, Austria
14
Macro-Economic Conditions,
Groups A and B, 2007
Group A
Group B
GDP pc
($,000)
34.3
33.4
15
Macro-Economic Conditions,
Groups A and B, 2007
Group A
Group B
GDP pc
($,000)
34.3
33.4
Inflation
rate
(%/yr)
2.1
2.1
15
Macro-Economic Conditions,
Groups A and B, 2007
Group A
Group B
GDP pc
($,000)
34.3
33.4
Inflation
rate
(%/yr)
2.1
2.1
Unemp
rate
(%)
5.6
6.6
15
Public Policies in Groups A and B
Benefit Generosity, 2002
Generosity Index (Scruggs)
Unemployment
Benefit
(0-15)
Group A
Group B
9.9
6.6
16
Public Policies in Groups A and B
Benefit Generosity, 2002
Generosity Index (Scruggs)
Unemployment Sickness
Benefit
Benefit
(0-15)
(0-15)
Group A
Group B
9.9
6.6
11.4
9.2
16
Public Policies in Groups A and B
Benefit Generosity, 2002
Generosity Index (Scruggs)
Unemployment Sickness Pension
Benefit
Benefit Benefit
(0-15)
(0-15)
(0-17)
Group A
Group B
9.9
6.6
11.4
9.2
12.5
10.4
16
Public Policies in Groups A and B
Benefit Generosity, 2002
Generosity Index (Scruggs)
Unemployment Sickness Pension Overall
Benefit
Benefit Benefit Benefit
(0-15)
(0-15)
(0-17)
(0-47)
Group A
Group B
9.9
6.6
11.4
9.2
12.5
10.4
33.8
26.2
16
Public Policies in Groups A and B
Benefit Generosity, 2002
Income
Generosity Index (Scruggs)
replacement
Unemployment Sickness Pension Overall
rate*
Benefit
Benefit Benefit Benefit (OECD)
(0-15)
(0-15)
(0-17)
(0-47)
Group A
Group B
9.9
6.6
11.4
9.2
12.5
10.4
33.8
26.2
38.0
27.4
* Di Tella, R., MacCulloch, R.J. and Oswald A.J. (2003). The Macroeconomics of
Happiness. The Review of Economics and Statistics, 85(4): 809-827.
16
Public Policies in Groups A and B
Respondents’ Ratings of Government
Services, (1-10 scale)
(In general, how would you rate the quality of each of the following
PUBLIC services in [your country]?)
17
Public Policies in Groups A and B
Respondents’ Ratings of Government
Services, (1-10 scale)
(In general, how would you rate the quality of each of the following
PUBLIC services in [your country]?)
Group A
Group B
Health
7.4
6.8
17
Public Policies in Groups A and B
Respondents’ Ratings of Government
Services, (1-10 scale)
(In general, how would you rate the quality of each of the following
PUBLIC services in [your country]?)
Family life
Group A
Group B
Health
7.4
6.8
Education
7.8
6.6
17
Public Policies in Groups A and B
Respondents’ Ratings of Government
Services, (1-10 scale)
(In general, how would you rate the quality of each of the following
PUBLIC services in [your country]?)
Family life
Group A
Group B
Health
7.4
6.8
Education
7.8
6.6
Care of:
children elderly
7.6
6.5
6.5
6.0
17
Public Policies in Groups A and B
Respondents’ Ratings of Government
Services, (1-10 scale)
(In general, how would you rate the quality of each of the following
PUBLIC services in [your country]?)
Family life
Group A
Group B
Health
7.4
6.8
Education
7.8
6.6
Care of:
children elderly
7.6
6.5
6.5
6.0
Public
pension
6.3
5.1
17
Trust in Government, Groups A and B
Respondents’ ratings, 1-10 scale
(Please tell me how much you personally trust each of
the following institutions.)
18
Trust in Government, Groups A and B
Respondents’ ratings, 1-10 scale
(Please tell me how much you personally trust each of
the following institutions.)
Group A
Group B
Government
6.3
5.0
18
Trust in Government, Groups A and B
Respondents’ ratings, 1-10 scale
(Please tell me how much you personally trust each of
the following institutions.)
Group A
Group B
Government
6.3
5.0
Political
parties
5.7
4.2
18
Trust in Government, Groups A and B
Respondents’ ratings, 1-10 scale
(Please tell me how much you personally trust each of
the following institutions.)
Group A
Group B
Government
6.3
5.0
Political
parties
5.7
4.2
Legal
system
7.4
5.8
18
Satisfaction with Work, Health, Family Life
Groups A and B, 2007
(scale 1-10)
(Could you please tell me … how satisfied you are
with each of the following items…)
19
Satisfaction with Work, Health, Family Life
Groups A and B, 2007
(scale 1-10)
(Could you please tell me … how satisfied you are
with each of the following items…)
Group A
Group B
Work
8.0
7.2
Group A: Denmark, Sweden, Finland
Group B: France, UK, Germany, Austria
19
Satisfaction with Work, Health, Family Life
Groups A and B, 2007
(scale 1-10)
(Could you please tell me … how satisfied you are
with each of the following items…)
Group A
Group B
Work
8.0
7.2
Health
7.9
7.4
Group A: Denmark, Sweden, Finland
Group B: France, UK, Germany, Austria
19
Satisfaction with Work, Health, Family Life
Groups A and B, 2007
(scale 1-10)
(Could you please tell me … how satisfied you are
with each of the following items…)
Group A
Group B
Work
8.0
7.2
Health Family Life
7.9
8.6
7.4
8.0
Group A: Denmark, Sweden, Finland
Group B: France, UK, Germany, Austria
19
Satisfaction with Work, Health, Family Life
Groups A and B, 2007
(scale 1-10)
(Could you please tell me … how satisfied you are
with each of the following items…)
Group A
Group B
Work
8.0
7.2
LIFE
Health Family Life SAT (H)
7.9
8.6
8.4
7.4
8.0
7.2
Group A: Denmark, Sweden, Finland
Group B: France, UK, Germany, Austria
19
Conclusion from Test
Although Groups A and B have similar
economic conditions, Happiness is
higher in Group A, where public
policies regarding work, health, and
family are more generous and
comprehensive.
20
Is Social Insurance Affordable in
Today’s LDCs? (1)
21
Is Social Insurance Affordable in
Today’s LDCs? (1)
The Start of “Social Insurance:” Germany, 1880s
Compulsory state
Insurance for:
Sickness
Industrial accidents
Pensions
Year
started
1883
1884
1889
21
Is Social Insurance Affordable in
Today’s LDCs? (2)
Level of
GDP per capita
in 2005 dollars
Germany, c. 1880
3200
22
Is Social Insurance Affordable in
Today’s LDCs? (2)
Level of
GDP per capita
Percent
in 2005 dollars of LDC
Germany, c. 1880
3200
population
LDCs, 2008
>3200
<3200
74
26
22
Is Social Insurance Affordable in
Today’s LDCs? (2)
Level of
GDP per capita
Percent
in 2005 dollars of LDC
Germany, c. 1880
3200
population
LDCs, 2008
>3200
<3200
74
(>6400)
(43)
26
22
Is Social Insurance Affordable in
Today’s LDCs? (3)
Growth Rate,GDP pc
23
Is Social Insurance Affordable in
Today’s LDCs? (3)
Growth Rate,GDP pc
Germany, 1880s
1.8
23
Is Social Insurance Affordable in
Today’s LDCs? (3)
Growth Rate,GDP pc
Germany, 1880s
1.8
All LDCs, 2000-2008
5.1
23
Is Social Insurance Affordable in
Today’s LDCs? (3)
Growth Rate,GDP pc
Germany, 1880s
1.8
All LDCs, 2000-2008
China
India
5.1
9.7
6.4
23
Is Social Insurance Affordable in
Today’s LDCs? (3)
Growth Rate,GDP pc
Germany, 1880s
1.8
All LDCs, 2000-2008
China
India
East Asia except China
South Asia except India
5.1
9.7
6.4
4.8
3.8
23
Is Social Insurance Affordable in
Today’s LDCs? (3)
Growth Rate,GDP pc
Germany, 1880s
1.8
All LDCs, 2000-2008
China
India
East Asia except China
South Asia except India
Middle East North Africa
Latin America
Sub-Saharan Africa
5.1
9.7
6.4
4.8
3.8
3.0
2.7
2.7
23
Is Social Insurance Affordable in
Today’s LDCs?
Conclusion: Countries accounting for ¾ of LDC
population have both:
a higher level of GDP pc, and
a higher growth rate of GDP pc
than Germany in the 1880s when it started social
insurance programs.
24
Is Social Insurance Affordable in
Today’s LDCs?
Conclusion: Countries accounting for ¾ of LDC
population have both:
a higher level of GDP pc, and
a higher growth rate of GDP pc
than Germany in the 1880s when it started social
insurance programs.
Social insurance is affordable in most LDCs.
24
Is Social Insurance Affordable in
Today’s LDCs?
Conclusion: Countries accounting for ¾ of LDC
population have both:
a higher level of GDP pc, and
a higher growth rate of GDP pc
than Germany in the 1880s when it started social
insurance programs.
Social insurance is affordable in most LDCs.
Public policy in LDCs could increase H!
24
Thank you
and
Be happy!
25
Which of the following situations would
you prefer, A or B?
A. Your income increases by $1,000; the
income of everyone else stays the same.
B. Your income increases by $2,000; the
income of everyone else increases by
$4,000.
26
Imagine you are 38 years old and are offered a
new job in a field you like. The job pays 15 per
cent more than your present job. It will also
require more work hours and take you far
away from your family more often. What is the
likelihood you would take the job?
1. Very likely
2. Somewhat likely
3. Somewhat unlikely
4. Very unlikely
27
Longer Term Relationship
ACTUAL
.05
.1
17 DEVELOPED COUNTRIES
(21 - 34 YEARS)
ITA
0
DEN
FRA
NLD GBR
DEU
USA
GRE CAN
BEL
LUX
IRL
NOR
Slope: NS
(n = 17)
POR
-.1
-.05
AUS
SPA
NIRL
1
3
5
Annual Growth Rate of GDPpc (%)
The fitted regression is: y = -0.001 + 0.002x (adjusted R2 = 0.006); t-stats in parentheses.
(-0.05)
(0.31)
28
Longer Term Relationship
ACTUAL
The fitted regression is: y = 0.025 - 0.009x (adjusted R2 = 0.229); t-statistics in parentheses.
(2.62)
(-1.63)
29
Longer Term Relationship
ACTUAL
.1
9 DEVELOPING COUNTRIES
(15 - 33 YEARS)
.05
MEX
TUR
ARG
0
SAFR
KOR
JAP
BRA
CHN
CHI
-.1
-.05
Slope: NS
(n = 9)
0
2
4
6
8
10
Annual Growth Rate of GDPpc (%)
The fitted regression is: y = 0.033 - 0.004x (adjusted R2 = 0.168); t-stats in parentheses.
(2.24)
(-1.19)
30
Longer Term Relationship
ACTUAL
.1
17 DEVELOPED, 11 TRANSITION,
AND 9 DEVELOPING COUNTRIES
(12 - 34 YEARS; MN = 22)
MEX
.05
RUS
TUR
LAT
LIT
KOR
JAP
CHN
Slope: NS
(n = 37)
-.1
-.05
0
ARG
ITA
CZE
POL
SPA
NIRL
BUL
DEN
FRA
LUX
SAFR
NLD
GBR
IRL
GDR BRA
ROM
NOR
DEU
USA
GRE
CAN
SVK
BEL
POR
AUS
CHI
HUN
EST
-1
0
1
2
3
4
5
6
7
8
9
10
Annual Growth Rate of GDPpc (%)
The fitted regression is: y = 0.018 - 0.003x (adjusted R2 = 0.069); t-stats in parentheses.
(3.07)
(-1.61)
31
Longer Term Relationship
ACTUAL
Slope: NS
(n=17)
The fitted regression is: y= -.255x + .012
(0.5)
(1.42)
(Adj R2= -0.05); t-stats in parentheses
32
LT Relation: Common Mistake
Recession
Expansion
It is easy to mistake ST relation for LT by looking at relation of H
to Y in Recession or Expansion (solid lines, a positive relation).
33
LT Relation: Common Mistake
Recession
Expansion
It is easy to mistake ST relation for LT by looking at relation of H
to Y in Recession or Expansion (solid lines, a positive relation).
For LT relation look at trends (broken lines, a nil relation).
33
Confusing ST with LT Relation: Example 1
Russian Federation
Life Satisfaction, c. 1989 – 2005, and Index of Real GDP, Annually 1989 - 2005
Full Cycle, 1990-2005
34
Confusing ST with LT Relation: Example 1
Russian Federation
Life Satisfaction, c. 1989 – 2005, and Index of Real GDP, Annually 1989 - 2005
contraction
only
Full Cycle, 1990-2005
Contraction Phase Only, 1990-98
34
Confusing ST with LT Relation: Example 2
Slovenia
Life Satisfaction, c. 1991 – 1999, and Index of Real GDP, Annually 1991 - 1999
Full Cycle, 1989-2000
35
Confusing ST with LT Relation: Example 2
Slovenia
Life Satisfaction, c. 1991 – 1999, and Index of Real GDP, Annually 1991 - 1999
expansion
only
Full Cycle, 1989-2000
Expansion Phase Only, 1991-2000
35