Raising Happiness in Poorer Countries: Will Economic Growth Do the Job? Richard A. Easterlin October (With help from Laura Angelescu-McVey, Robson Morgan, Heinz-Henry Noll, Anke Plagnol, Onnicha Sawangfa, Malgorzata Switek, Jacqueline Smith Zweig)

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: Latin American countries, (Latinobarometro) 3

LDC Evidence Long term trends in: Latin American countries, (Latinobarometro) countries, years, scattered across three continents (World Values Survey) 3

LDC Evidence Long term trends in: Latin American countries, (Latinobarometro) countries, years, scattered across three continents (World Values Survey) China, (Real per capita income doubling in less than 10 years) 3

China (1) World Values Survey, (scale 1-10) 4 (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’ ‘Satisfied’ (urban pop) (total pop)

China (2) Gallup, (1- 4 scale) 5 (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?)

China (3) Gallup, (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?) 1-10 scale 0-10 scale

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 LT Relation

Some time series evidence from TCs 8 Note: No LT change in Life Satisfaction,

Satisfaction with various areas (“domains”) of life: Former GDR Positive changes: (pre-transition) (post-transition) Change Satisfaction with: Environment (0-10 scale) 9

Satisfaction with various areas (“domains”) of life: Former GDR Positive changes: (pre-transition) (post-transition) Change Satisfaction with: Environment Goods availability (0-10 scale) 9

Satisfaction with various areas (“domains”) of life: Former GDR Positive changes: (pre-transition) (post-transition) Change Satisfaction with: Environment Goods availability Dwelling (0-10 scale) 9

Satisfaction with various areas (“domains”) of life: Former GDR Positive changes: (pre-transition) (post-transition) Change Satisfaction with: Environment Goods availability Dwelling Standard of living (0-10 scale) 9

Satisfaction with various areas (“domains”) of life: Former GDR Positive changes: (pre-transition) (post-transition) Change Satisfaction with: Environment Goods availability Dwelling Standard of living Household income (0-10 scale) 9

Satisfaction with various areas (“domains”) of life: Former GDR Positive changes: (pre-transition) (post-transition) Change Satisfaction with: Environment Goods availability Dwelling Standard of living Household income And yet… (0-10 scale) 9

Satisfaction with various areas (“domains”) of life: Former GDR Positive changes: (pre-transition) (post-transition) Change Satisfaction with: Environment Goods availability Dwelling Standard of living Household income And yet… Satisfaction (0-10 scale) 9 Life -0.02

Satisfaction with various areas (“domains”) of life: Former GDR (Pre-transition) (Post-transition) Negative changes: Change Satisfaction with: Health

Satisfaction with various areas (“domains”) of life: Former GDR (Pre-transition) (Post-transition) Negative changes: Change Satisfaction with: Health Work

Satisfaction with various areas (“domains”) of life: Former GDR (Pre-transition) (Post-transition) Negative changes: Change Satisfaction with: Health Work Childcare

Satisfaction with various areas (“domains”) of life: Former GDR (Pre-transition) (Post-transition) Negative changes: Change Satisfaction with: Health Work Childcare Net balance 10

Satisfaction with various areas (“domains”) of life: Former GDR (Pre-transition) (Post-transition) Negative changes: Change Satisfaction with: Health Work Childcare Net balance Satisfaction Life

A check: Satisfaction with various domains of life: Hungary Domain Change Standard of living Household income (0-10 scale) 11

A check: Satisfaction with various domains of life: Hungary Domain Change Standard of living Household income Health Home Work (0-10 scale) 11

Lesson from TCs Money (Material living level) isn’t everything. Public policies regarding Family life, Health, Job Security matter. 12

13 Does public policy matter?

Point-of-time test: Compare European countries with similar economic conditions, but different policies – Does Happiness differ? 13 Does public policy matter?

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)

Macro-Economic Conditions, Groups A and B, 2007 Group A Group B GDP pc ($,000) Inflation rate (%/yr)

Macro-Economic Conditions, Groups A and B, 2007 Group A Group B GDP pc ($,000) Inflation rate (%/yr) 2.1 Unemp rate (%)

Public Policies in Groups A and B Benefit Generosity, 2002 Group A Group B Unemployment Benefit (0-15) Generosity Index (Scruggs)

Public Policies in Groups A and B Benefit Generosity, 2002 Group A Group B Unemployment Benefit (0-15) Sickness Benefit (0-15) Generosity Index (Scruggs)

Public Policies in Groups A and B Benefit Generosity, 2002 Group A Group B Unemployment Benefit (0-15) Sickness Benefit (0-15) Pension Benefit (0-17) Generosity Index (Scruggs)

Public Policies in Groups A and B Benefit Generosity, 2002 Group A Group B Unemployment Benefit (0-15) Sickness Benefit (0-15) Pension Benefit (0-17) Overall Benefit (0-47) Generosity Index (Scruggs)

Public Policies in Groups A and B Benefit Generosity, 2002 Group A Group B Unemployment Benefit (0-15) Sickness Benefit (0-15) Pension Benefit (0-17) Overall Benefit (0-47) Income replacement rate* (OECD) Generosity Index (Scruggs) * Di Tella, R., MacCulloch, R.J. and Oswald A.J. (2003). The Macroeconomics of Happiness. The Review of Economics and Statistics, 85(4):

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 17 Health 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 17 Health Education Family life 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 17 Health Education Care of: children elderly Family life 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 17 Health Education Care of: children elderly Public pension Family life 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]?)

Trust in Government, Groups A and B Respondents’ ratings, 1-10 scale 18 (Please tell me how much you personally trust each of the following institutions.)

Trust in Government, Groups A and B Respondents’ ratings, 1-10 scale Group A Group B Government (Please tell me how much you personally trust each of the following institutions.)

Trust in Government, Groups A and B Respondents’ ratings, 1-10 scale Group A Group B Government Political parties (Please tell me how much you personally trust each of the following institutions.)

Trust in Government, Groups A and B Respondents’ ratings, 1-10 scale Group A Group B Government Political parties Legal system (Please tell me how much you personally trust each of the following institutions.)

Satisfaction with Work, Health, Family Life Groups A and B, (scale 1-10) (Could you please tell me … how satisfied you are with each of the following items…)

Satisfaction with Work, Health, Family Life Groups A and B, (scale 1-10) Group A: Denmark, Sweden, Finland Group B: France, UK, Germany, Austria Group A Group B Work (Could you please tell me … how satisfied you are with each of the following items…)

Satisfaction with Work, Health, Family Life Groups A and B, (scale 1-10) Group A: Denmark, Sweden, Finland Group B: France, UK, Germany, Austria Group A Group B Work Health (Could you please tell me … how satisfied you are with each of the following items…)

Satisfaction with Work, Health, Family Life Groups A and B, (scale 1-10) Group A: Denmark, Sweden, Finland Group B: France, UK, Germany, Austria Group A Group B Work Health Family Life (Could you please tell me … how satisfied you are with each of the following items…)

Satisfaction with Work, Health, Family Life Groups A and B, (scale 1-10) Group A: Denmark, Sweden, Finland Group B: France, UK, Germany, Austria Group A Group B Work Health Family Life LIFE SAT (H) (Could you please tell me … how satisfied you are with each of the following items…)

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 Year Insurance for: started Sickness1883 Industrial accidents1884 Pensions

Is Social Insurance Affordable in Today’s LDCs? (2) Level GDP per capita in 2005 dollars Germany, c of

Is Social Insurance Affordable in Today’s LDCs? (2) Level GDP per capitaPercent in 2005 dollarsof LDC Germany, c population LDCs, 2008 >3200 < of 74

Is Social Insurance Affordable in Today’s LDCs? (2) Level GDP per capitaPercent in 2005 dollarsof LDC Germany, c population LDCs, 2008 >3200 < (>6400) (43) 22 of 74

Is Social Insurance Affordable in Today’s LDCs? (3) 23 Growth Rate,GDP pc

Is Social Insurance Affordable in Today’s LDCs? (3) Germany, 1880s Growth Rate,GDP pc

Is Social Insurance Affordable in Today’s LDCs? (3) Germany, 1880s1.8 All LDCs, Growth Rate,GDP pc

Is Social Insurance Affordable in Today’s LDCs? (3) Germany, 1880s1.8 All LDCs, China9.7 India Growth Rate,GDP pc

Is Social Insurance Affordable in Today’s LDCs? (3) Germany, 1880s1.8 All LDCs, China9.7 India6.4 East Asia except China4.8 South Asia except India Growth Rate,GDP pc

Is Social Insurance Affordable in Today’s LDCs? (3) Germany, 1880s1.8 All LDCs, China9.7 India6.4 East Asia except China4.8 South Asia except India3.8 Middle East North Africa3.0 Latin America2.7 Sub-Saharan Africa Growth Rate,GDP pc

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,

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

The fitted regression is: y = x (adjusted R 2 = 0.006); t-stats in parentheses. (-0.05) (0.31) Longer Term Relationship ACTUAL 28

The fitted regression is: y = x (adjusted R 2 = 0.229); t-statistics in parentheses. (2.62) (-1.63) Longer Term Relationship 29 ACTUAL

The fitted regression is: y = x (adjusted R 2 = 0.168); t-stats in parentheses. (2.24) (-1.19) Longer Term Relationship 30 ACTUAL

Longer Term Relationship The fitted regression is: y = x (adjusted R 2 = 0.069); t-stats in parentheses. (3.07) (-1.61) 31 ACTUAL

The fitted regression is: y= -.255x (Adj R 2 = -0.05); t-stats in parentheses (0.5) (1.42) Slope: NS (n=17) 32 Longer Term Relationship ACTUAL

LT Relation: Common Mistake 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). Recession Expansion 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 – 2005, and Index of Real GDP, Annually Full Cycle,

Confusing ST with LT Relation: Example 1 Russian Federation Life Satisfaction, c – 2005, and Index of Real GDP, Annually contraction only Full Cycle, Contraction Phase Only,

Confusing ST with LT Relation: Example 2 Slovenia Life Satisfaction, c – 1999, and Index of Real GDP, Annually Full Cycle,

Confusing ST with LT Relation: Example 2 Slovenia Life Satisfaction, c – 1999, and Index of Real GDP, Annually expansion only Full Cycle, Expansion Phase Only,