1. Raising Happiness in Poorer Countries: Will Economic Growth Do the Job? Richard A. Easterlin October 2011 1 (With help from Laura Angelescu-McVey, Robson Morgan, Heinz-Henry Noll, Anke Plagnol, Onnicha Sawangfa, Malgorzata Switek, Jacqueline Smith Zweig)

2. Growth and Happiness In less developed countries (LDCs) rapid economic growth does not raise the growth rate of Happiness. 2

3. 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

4. LDC Evidence Long term trends in: 1. 1. 17 Latin American countries, 1994-2006 (Latinobarometro) 3

5. LDC Evidence Long term trends in: 1. 1. 17 Latin American countries, 1994-2006 (Latinobarometro) 2. 2. 9 countries, 15-33 years, scattered across three continents (World Values Survey) 3

6. LDC Evidence Long term trends in: 1. 1. 17 Latin American countries, 1994-2006 (Latinobarometro) 2. 2. 9 countries, 15-33 years, scattered across three continents (World Values Survey) 3. 3. China, 1990-2010 (Real per capita income doubling in less than 10 years) 3

7. China (1) World Values Survey, 1990-2007 (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’2345678910 ‘Satisfied’ 19901995 2000 20052010 (urban pop) (total pop)

8. China (2) Gallup, 1997-2004 (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?)

9. China (3) Gallup, 1999-2010 6 (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

10. Q. If rapid growth of income doesn’t in itself raise happiness, can anything be done to increase happiness? 7 LT Relation

11. 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

12. Some time series evidence from TCs 8 Note: No LT change in Life Satisfaction, 1990-1999

13. Satisfaction with various areas (“domains”) of life: Former GDR 1990 1999 Positive changes: (pre-transition) (post-transition) Change Satisfaction with: Environment 3.11 6.47 +3.36 (0-10 scale) 9

14. Satisfaction with various areas (“domains”) of life: Former GDR 1990 1999 Positive changes: (pre-transition) (post-transition) Change Satisfaction with: Environment 3.11 6.47 +3.36 Goods availability 3.16 6.20 +3.04 (0-10 scale) 9

15. Satisfaction with various areas (“domains”) of life: Former GDR 1990 1999 Positive changes: (pre-transition) (post-transition) Change Satisfaction with: Environment 3.11 6.47 +3.36 Goods availability 3.16 6.20 +3.04 Dwelling 6.93 7.36 +0.43 (0-10 scale) 9

16. Satisfaction with various areas (“domains”) of life: Former GDR 1990 1999 Positive changes: (pre-transition) (post-transition) Change 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 (0-10 scale) 9

17. Satisfaction with various areas (“domains”) of life: Former GDR 1990 1999 Positive changes: (pre-transition) (post-transition) Change 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 (0-10 scale) 9

18. Satisfaction with various areas (“domains”) of life: Former GDR 1990 1999 Positive changes: (pre-transition) (post-transition) Change 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… (0-10 scale) 9

19. Satisfaction with various areas (“domains”) of life: Former GDR 1990 1999 Positive changes: (pre-transition) (post-transition) Change 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… Satisfaction 6.57 6.55 (0-10 scale) 9 Life -0.02

20. Satisfaction with various areas (“domains”) of life: Former GDR (Pre-transition) (Post-transition) Negative changes:19901999Change Satisfaction with: Health 6.62 6.20 -0.42 10

21. Satisfaction with various areas (“domains”) of life: Former GDR (Pre-transition) (Post-transition) Negative changes:19901999Change Satisfaction with: Health 6.62 6.20 -0.42 Work 7.23 6.48 -0.75 10

22. Satisfaction with various areas (“domains”) of life: Former GDR (Pre-transition) (Post-transition) Negative changes:19901999Change Satisfaction with: Health 6.62 6.20 -0.42 Work 7.23 6.48 -0.75 Childcare 7.54 6.48 -1.06 10

23. Satisfaction with various areas (“domains”) of life: Former GDR (Pre-transition) (Post-transition) Negative changes:19901999Change Satisfaction with: Health 6.62 6.20 -0.42 Work 7.23 6.48 -0.75 Childcare 7.54 6.48 -1.06 Net balance 10

24. Satisfaction with various areas (“domains”) of life: Former GDR (Pre-transition) (Post-transition) Negative changes:19901999Change Satisfaction with: Health 6.62 6.20 -0.42 Work 7.23 6.48 -0.75 Childcare 7.54 6.48 -1.06 Net balance Satisfaction 6.57 6.55 -0.02 10 Life

25. A check: Satisfaction with various domains of life: Hungary Domain19921997Change Standard of living 4.6 4.5 -0.1 Household income 3.6 3.4 -0.2 (0-10 scale) 11

26. A check: Satisfaction with various domains of life: Hungary Domain19921997Change Standard of living 4.6 4.5 -0.1 Household income 3.6 3.4 -0.2 Health 6.4 5.8 -0.6 Home 7.1 6.5 -0.6 Work 7.4 6.7 -0.7 (0-10 scale) 11

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

28. 13 Does public policy matter?

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

30. European Countries with Similar Economic Conditions, Different Public Policies Group A: Welfare States - Denmark, Sweden, Finland Group B: France, UK, Germany, Austria 14

31. Macro-Economic Conditions, Groups A and B, 2007 Group A Group B GDP pc ($,000) 34.3 33.4 15

32. Macro-Economic Conditions, Groups A and B, 2007 Group A Group B GDP pc ($,000) 34.3 33.4 Inflation rate (%/yr) 2.1 15

33. Macro-Economic Conditions, Groups A and B, 2007 Group A Group B GDP pc ($,000) 34.3 33.4 Inflation rate (%/yr) 2.1 Unemp rate (%) 5.6 6.6 15

34. Public Policies in Groups A and B Benefit Generosity, 2002 Group A Group B Unemployment Benefit (0-15) 9.9 6.6 16 Generosity Index (Scruggs)

35. Public Policies in Groups A and B Benefit Generosity, 2002 Group A Group B Unemployment Benefit (0-15) 9.9 6.6 Sickness Benefit (0-15) 11.4 9.2 16 Generosity Index (Scruggs)

36. Public Policies in Groups A and B Benefit Generosity, 2002 Group A Group B Unemployment Benefit (0-15) 9.9 6.6 Sickness Benefit (0-15) 11.4 9.2 Pension Benefit (0-17) 12.5 10.4 16 Generosity Index (Scruggs)

37. Public Policies in Groups A and B Benefit Generosity, 2002 Group A Group B Unemployment Benefit (0-15) 9.9 6.6 Sickness Benefit (0-15) 11.4 9.2 Pension Benefit (0-17) 12.5 10.4 16 Overall Benefit (0-47) 33.8 26.2 Generosity Index (Scruggs)

38. Public Policies in Groups A and B Benefit Generosity, 2002 Group A Group B Unemployment Benefit (0-15) 9.9 6.6 Sickness Benefit (0-15) 11.4 9.2 Pension Benefit (0-17) 12.5 10.4 16 Overall Benefit (0-47) 33.8 26.2 Income replacement rate* (OECD) 38.0 27.4 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): 809-827.

39. 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]?)

40. Group A Group B 17 Health 7.4 6.8 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]?)

41. Group A Group B 17 Health 7.4 6.8 Education 7.8 6.6 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]?)

42. Group A Group B 17 Health 7.4 6.8 Education 7.8 6.6 Care of: children elderly 7.6 6.5 6.5 6.0 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]?)

43. Group A Group B 17 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 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]?)

44. 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.)

45. Trust in Government, Groups A and B Respondents’ ratings, 1-10 scale Group A Group B Government 6.3 5.0 18 (Please tell me how much you personally trust each of the following institutions.)

46. Trust in Government, Groups A and B Respondents’ ratings, 1-10 scale Group A Group B Government 6.3 5.0 Political parties 5.7 4.2 18 (Please tell me how much you personally trust each of the following institutions.)

47. Trust in Government, Groups A and B Respondents’ ratings, 1-10 scale Group A Group B Government 6.3 5.0 Political parties 5.7 4.2 Legal system 7.4 5.8 18 (Please tell me how much you personally trust each of the following institutions.)

48. Satisfaction with Work, Health, Family Life Groups A and B, 2007 19 (scale 1-10) (Could you please tell me … how satisfied you are with each of the following items…)

49. Satisfaction with Work, Health, Family Life Groups A and B, 2007 19 (scale 1-10) Group A: Denmark, Sweden, Finland Group B: France, UK, Germany, Austria Group A Group B Work 8.0 7.2 (Could you please tell me … how satisfied you are with each of the following items…)

50. Satisfaction with Work, Health, Family Life Groups A and B, 2007 19 (scale 1-10) Group A: Denmark, Sweden, Finland Group B: France, UK, Germany, Austria Group A Group B Work 8.0 7.2 Health 7.9 7.4 (Could you please tell me … how satisfied you are with each of the following items…)

51. Satisfaction with Work, Health, Family Life Groups A and B, 2007 19 (scale 1-10) Group A: Denmark, Sweden, Finland Group B: France, UK, Germany, Austria Group A Group B Work 8.0 7.2 Health 7.9 7.4 Family Life 8.6 8.0 (Could you please tell me … how satisfied you are with each of the following items…)

52. Satisfaction with Work, Health, Family Life Groups A and B, 2007 19 (scale 1-10) Group A: Denmark, Sweden, Finland Group B: France, UK, Germany, Austria Group A Group B Work 8.0 7.2 Health 7.9 7.4 Family Life 8.6 8.0 LIFE SAT (H) 8.4 7.2 (Could you please tell me … how satisfied you are with each of the following items…)

53. 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

54. Is Social Insurance Affordable in Today’s LDCs? (1) 21

55. 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 Pensions1889 21

56. Is Social Insurance Affordable in Today’s LDCs? (2) Level GDP per capita in 2005 dollars Germany, c. 1880 3200 22 of

57. Is Social Insurance Affordable in Today’s LDCs? (2) Level GDP per capitaPercent in 2005 dollarsof LDC Germany, c. 1880 3200 population LDCs, 2008 >3200 <3200 26 22 of 74

58. Is Social Insurance Affordable in Today’s LDCs? (2) Level GDP per capitaPercent in 2005 dollarsof LDC Germany, c. 1880 3200 population LDCs, 2008 >3200 <3200 26 (>6400) (43) 22 of 74

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

60. Is Social Insurance Affordable in Today’s LDCs? (3) Germany, 1880s1.8 23 Growth Rate,GDP pc

61. Is Social Insurance Affordable in Today’s LDCs? (3) Germany, 1880s1.8 All LDCs, 2000-20085.1 23 Growth Rate,GDP pc

62. Is Social Insurance Affordable in Today’s LDCs? (3) Germany, 1880s1.8 All LDCs, 2000-20085.1 China9.7 India6.4 23 Growth Rate,GDP pc

63. Is Social Insurance Affordable in Today’s LDCs? (3) Germany, 1880s1.8 All LDCs, 2000-20085.1 China9.7 India6.4 East Asia except China4.8 South Asia except India3.8 23 Growth Rate,GDP pc

64. Is Social Insurance Affordable in Today’s LDCs? (3) Germany, 1880s1.8 All LDCs, 2000-20085.1 China9.7 India6.4 East Asia except China4.8 South Asia except India3.8 Middle East North Africa3.0 Latin America2.7 Sub-Saharan Africa2.7 23 Growth Rate,GDP pc

65. 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

66. 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

67. 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

68. Thank you and Be happy! 25

69. 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

70. 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

71. The fitted regression is: y = -0.001 + 0.002x (adjusted R 2 = 0.006); t-stats in parentheses. (-0.05) (0.31) Longer Term Relationship ACTUAL 28

72. The fitted regression is: y = 0.025 - 0.009x (adjusted R 2 = 0.229); t-statistics in parentheses. (2.62) (-1.63) Longer Term Relationship 29 ACTUAL

73. The fitted regression is: y = 0.033 - 0.004x (adjusted R 2 = 0.168); t-stats in parentheses. (2.24) (-1.19) Longer Term Relationship 30 ACTUAL

74. Longer Term Relationship The fitted regression is: y = 0.018 - 0.003x (adjusted R 2 = 0.069); t-stats in parentheses. (3.07) (-1.61) 31 ACTUAL

75. The fitted regression is: y= -.255x +.012 (Adj R 2 = -0.05); t-stats in parentheses (0.5) (1.42) Slope: NS (n=17) 32 Longer Term Relationship ACTUAL

76. 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

77. 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

78. Confusing ST with LT Relation: Example 1 Russian Federation Life Satisfaction, c. 1989 – 2005, and Index of Real GDP, Annually 1989 - 2005 34 Full Cycle, 1990-2005

79. Confusing ST with LT Relation: Example 1 Russian Federation Life Satisfaction, c. 1989 – 2005, and Index of Real GDP, Annually 1989 - 2005 34 contraction only Full Cycle, 1990-2005 Contraction Phase Only, 1990-98

80. Confusing ST with LT Relation: Example 2 Slovenia Life Satisfaction, c. 1991 – 1999, and Index of Real GDP, Annually 1991 - 1999 35 Full Cycle, 1989-2000

81. Confusing ST with LT Relation: Example 2 Slovenia Life Satisfaction, c. 1991 – 1999, and Index of Real GDP, Annually 1991 - 1999 35 expansion only Full Cycle, 1989-2000Expansion Phase Only, 1991-2000