… and the Pursuit of Happiness - Institute of Economic Affairs

… and the pursuit of happiness
subjective wellbeing
long-run changes in GDP. Indeed, Easterlin and Angelescu (2009)
argue that only long-run economic growth can be used to assess
the relationship between growth and wellbeing.
We can assess long-run differences for all countries by
comparing changes in satisfaction and national income between
the first and the last time we observe a country in the World
Values Survey. For the countries in the World Values Survey that
we observe multiple times, the average difference in time between
first and last observations is about eleven years. This is comparable
with Easterlin and Sawangfa’s notion of the ‘long run’ – they
require data spanning at least ten years – but a little lower than
Easterlin and Angelescu’s twelve-year requirement. It appears
from this analysis that, for most countries, GDP and satisfaction
move together. There is, nevertheless, a notable number of countries
for which life satisfaction and GDP move in opposite directions.
Even so, the correlation between life satisfaction and GDP
is positive and remarkably strong. Looking at the long-run data
overall, once again we cannot reject the hypothesis that the true
coefficient explaining the relationship between satisfaction and
national income is between 0.3 and 0.4.
The influence of the transition economies
Using these same data (although including the observations from
the unrepresentative national samples and not adjusting for wave
fixed effects), Easterlin and Sawangfa (2008: 13) argue that ‘the
positive association between the change in life satisfaction and
that in GDP per capita reported by Stevenson and Wolfers rests
almost entirely on the positively correlated V-shaped movement
of the two variables during the post-1990 collapse and recovery
Figure 6
Change in satisfaction, relative to country and wave fixed effects
0.4
0.2
0.0
−0.2
−0.4
−0.6
Long differences in life satisfaction and log GDP,
World Values Survey
RUS
LTU
KOR Offscale
MDA
VEN ITA
(1, 0.33)
ESP
CZE
MEX
BGR UKR
AUT
FRA FIN BRA
IRL
EST
MLT
USA
ISL
NOR
AUS
JPN
POL
LVA
SWE GBR
SCG
SVK
BLR
ROM
TUR
HUN
MKD
in the transition countries’. In order to investigate this claim,
we separately estimated our panel regressions and long differences
for the sample of transition countries only and then for all
other World Values Survey nations. While breaking the sample
apart like this reduces our statistical precision, the key inferences
remain the same in both samples: the influence of GDP growth
on satisfaction is positive, statistically significantly different from
SVN
KOR
y = 0.47*ln(x) [se=0.13]
Correlation=0.54
−.5 −.25 0 .25 .5
Change in log GDP, relative to country and wave fixed effects
Note: Data are aggregated by first standardising individual-level data to have mean zero and unit
standard deviation, and then taking country-year averages of the standardised values. Selected
countries only have been marked.
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