Measuring World Better Life Frontier: A Composite Indicator for OECD Better Life Index

The OECD Better Life initiative recently released a comprehensive set of 11 indicators of well-being covering a group of countries. Each individual indicator corresponds to a key topic that is essential to well-being. However, the problem of aggregating them is left to users of this dataset. Using these as individual indicators, we propose a composite indicator of overall well-being, which is intended to measure the performance of each country in terms of providing well-being to its people. The ‘benefit of the doubt’ approach (BOD), a well-known aggregation tool based on a weighed sum, assigns the most favourable weights for each entity under investigation. BOD may also be considered to evaluate the performance of each entity in terms of its efficiency. Regarding individual indicators as outputs, it constructs the benchmark production frontier from observed individual indicators. A composite indicator based on BOD equals the distance between each entity’s individual indicator and the production frontier, indicating its efficiency. It is widely considered that the well-being of a country’s people stems from its productive base, which is characterized by capital assets and social infrastructures. Thus, the productive base can be considered the input used to produce well-being, which is reflected by individual indicators. Therefore, when we apply BOD to aggregate individual well-being indicators across countries, we implicitly assume that all countries have the same productive base, as BOD addresses only the output and neglects the input. This inaccurate assumption leads to a distorted performance measure. Data envelopment analysis (DEA), in which BOD has its roots, is a tool to measure the efficiency of each entity by allowing for differences in inputs as well as outputs across entities. DEA also measures efficiency by using the distance to the production frontier; however, unlike BOD, DEA constructs the production frontier more accurately by utilizing the information of inputs as well as outputs, leading to a better performance measure. We apply DEA to aggregate 11 individual well-being indicators into a composite indicator using the World Bank’s estimates of each country’s productive base. The composite indicator based on BOD is distributed similarly to and is highly correlated with the existing Human Development Indicator (HDI). It is also positively correlated with GDP per capita. On the other hand, we show that the composite indicator based on DEA is negatively correlated with HDI as well as GDP per capita.     

Capability Approach and Multidimensional Well-Being: The Italian Case of BES

This paper lies within the debate on GDP and beyond and provides an empirical assessment of the Italian equitable and sustainable well-being (BES) as a composite measure of multidimensional well-being. From a policy perspective, the goal is to deliver a reading of the Italian BES able to shed light on its usability. The aim is to offer a suitable method for making the information included in the BES more viable for policy design. To this end, the paper is grounded in an interpretation of the Italian BES through the lens of the capability approach and investigates the relations among BES indicators and life domains. The empirical assessment uses Italian data from the national survey “Aspects of daily life” and applies the Structural Equation Model to estimate several life capabilities and their causal path. Outcomes show the interrelated nature of multi-dimensional well-being and prove the role of exogenous causes in the determination of capabilities. Moreover, the paper provides a final ranking analysis where Italian regions are compared based on their position per capability and income performance. Results confirm, on one hand, the disparity of income and well-being measurements and the importance of multidimensional assessment for human development and, on the other, the importance of focusing on the single components of multidimensional well-being and their interconnections.     

Great Expectations: The Unintended Consequences of Educational Choices

Human capital is invariably found to be an important explanatory variable of various proxies for well being (WB), i.e. income, happiness, job and life satisfaction, and health status. Nevertheless, to date few systematic efforts have been made to explain its various interconnected functions. The U-shaped age-SWB relation found in many empirical studies suggests that investigating the pattern of different measures of WB over people’s life cycles may reveal important information and provide useful insights into the principal mechanisms that connect human capital and WB. In this paper, I explore data drawn from the Survey on Household Income and Wealth (SHIW) conducted by the Bank of Italy, which is a rich source of information on people’s socioeconomic and educational backgrounds, educational and skill mismatches in the workplace, and various measures of WB such as income, happiness, job satisfaction, and health status. I adopt a novel approach based on the idea that one should look at the overall contribution of education to well being within people’s life-cycles. The tentative explanations of my empirical findings are: (a) more educated people and people with vocational educations experience wide mismatches in their aspirations and expectations early in their adult lives; (b) these mismatches are largely confined to the labour market; and (c) the curvature of the U-shaped age-happiness relationship depends on the level and type of education. The suggested interpretation of these results is that education affects both people’s expectations and the way they react to unfulfilled aspirations.     

Measurement Assessment in Cross-Country Comparative Analysis: Rasch Modelling on a Measure of Institutional Quality

This paper uses recent multidimensional well-being measurements to examine multidimensional well-being and inequality across the European regions in 2000 and 2014 with the use of eleven well-being indicators from the OECD Better Life Index. We use generalized mean aggregation method with alternative parameters to allow different substitutability and complementarity levels between well-being dimensions, which range between perfect substitutability and some degree of complementarity between the dimensions, to examine well-being and inequality across the European regions. Accounting for the interactions between the well-being dimensions matters for the multidimensional well-being and inequality across the European regions. The results show that the multidimensional well-being across the European regions are relatively lower when the dimensions are more seen as complements compared to the case when they are considered to be perfect substitutes. Furthermore, there is also a higher degree of multidimensional inequality across the European regions when the dimensions are considered to have some complementarity. Changes in well-being dimensions between 2000 and 2014 indicates that multidimensional well-being improved and inequality decreased in the personal and community well-being categories, but remained unchanged in material well-being category across the European regions irrespective of interaction levels between well-being dimensions. Policy implications of these multidimensional well-being indices are also evaluated by using these indices to determine the eligible regions for the European Union structural funds where the number eligible regions shows some variation depending on whether the dimensions are perfect substitutes or more of complements.

     

“Beyond GDP” Effects on National Subjective Well-Being of OECD Countries

Some authors claim that maximizing subjective well-being is a more meaningful social objective than maximizing GDP and that other factors beyond income play a major role in defining well-being. In this work, we study two issues connected with this claim, looking at the context of OECD member countries. We look at the crowded category of proposed, “beyond GDP” policy-controlled factors, searching for evidence that some might be major determinants of national average subjective well-being. We also seek to compare any such effect with that of GDP, in order to evaluate if these factors have a better chance of leading to a maximization of well-being than GDP itself. In our analyses, we make use of partial order methods that have been rarely applied to this field of study. They seem particularly appropriate to the case, as well-being and its components are generally theorized as strongly multidimensional while standard modeling strategies require a great deal of compromise when working with many potential regressors and non-trivial levels of multicollinearity.     

Relative Economic Position and Subjective Well-Being in a Poor Society: Does Relative Position Indicator Matter?

Concern for relative income (or status in general) may have important implications for poverty and individual well-being. This paper examines the impact of relative economic position on individual’s level of well-being among poor communities in rural Ethiopia. The analysis uses a self-reported measure of overall life-evaluation as a measure of individual well-being. Despite the fact that well-being is multidimensional, the impact of non-money metric measures of relative economic position on individual well-being has not been given a lot of attention in the literature. In this study, relative economic position is measured using consumption data, asset index, and respondent’s own perception of relative wealth. The asset index captures the non-monetary dimensions of economic welfare, including education, physical assets, and social capital. We use data from the 2004 and 2009 waves of the Ethiopia Rural Household Survey and employ a multilevel modelling technique to account for individual and group level heterogeneity in our empirical analysis. We find no significant relationship between individual well-being and relative economic position measured with in consumption terms. In contrast, we do find a significant negative impact of relative position on individual well-being when we use asset indices and respondent’s own perception of relative wealth to measure relative economic position. Our findings suggest that when individuals compare themselves with others, they evaluate various aspects of their life, including their financial conditions, asset holdings, and social relations, which are hardly captured by consumption or income data in many poor countries.     

How are the Kids Doing? How do We Know?

With a focus on the United States, this paper addresses the basic social indicators question: How are we doing? More specifically, with respect to children, how are our kids (including adolescents and youths) doing? These questions can be addressed by comparisons: (1) to past historical values, (2) to other contemporaneous units (e.g., comparisons among subpopulations, states, regions, countries), or (3) to goals or other externally established standards. The Child and Youth Well-Being Index (CWI), which we have developed over the past decade, uses all three of these points of comparison. The CWI is a composite index based on 28 social indicator time series of various aspects of the well-being of children and youth in American society that date back to 1975, which is used as a base year for measuring changes (improvements or deterioration) in subsequent years. The CWI is evidence-based not only in the sense that it uses time series of empirical data for its construction, but also because the 28 indicators are grouped into seven domains of well-being or areas of social life that have been found to define the conceptual space of the quality of life in numerous studies of subjective well-being. Findings from research using the CWI reported in the paper include: (1) trends in child and youth well-being in the United States over time, (2) international comparisons, and (3) best-practice analyses.     

Dimensions Of Well-Being And Their Measurement: The Spf-Il Scale

What are the dimensions of well-being? That is, what universal goals need to be realized by individuals in order to enhance their well-being? Social production function (SPF) theory asserts that the universal goals affection, behavioral confirmation, status, comfort and stimulation are the relevant dimensions of subjective well-being. Realization of these substantive goals and the perspective on opportunities to realize these goals in the future contributes to the affective and cognitive component of well-being. The theoretical elaboration of this theory has been published elsewhere. This paper provides a measurement instrument for the dimensions of well-being. To measure levels of affection, behavioral confirmation, status, comfort and stimulation and empirically validate the dimensions of well-being, the SPF-IL scale was developed. This paper presents findings from a pilot study (n=145), the main study (n=1094), a test–retest examination (n=163), and a validation study (n=725). The measurement model was tested by means of structural equation modeling. Confirmatory factor analysis supported the dimensional structure of well-being indicating construct validity. The overall fit of the model was sufficient, in spite of the somewhat problematic measurement of status, and the test–retest study showed an acceptable level of stability. As for the content validity of the dimensions and their measurement, various sub-studies showed that the SPF-IL scale is a valid instrument, doing at least as well as popular measures of overall well-being but also specifying its dimensions.     

Mismatch in the Norwegian Labour Market 2003–2013: Did Immigrants Make a Difference?

For the Norwegian economy, 2003–2013 was a period of large growth and big business cycle fluctuations. The aggregate uv-curve reflects this and shows a reduction in both the vacancy rate and the unemployment rate from 2003 to 2013, suggesting improved labour market matching over the period. The inclusion of Eastern European countries in the European Union in 2004 and 2007 caused an increasing influx of foreign job seekers. I quantify regional and occupational mismatch, and make a distinction between natives and immigrants. Indicators show no reduction in mismatch over time, which therefore cannot account for the increased labour market efficiency that the uv-curve suggests. However, ‘footloose’ immigrants seem to have adapted better than ‘rooted’ natives to the structure of labour demand in the regional dimension, and thus to have contributed to a lower level of mismatch than would have resulted without immigrants. In the occupational dimension immigrants made no significant difference. Levels and differences in employment and unemployment among and between immigrants and natives were not well explained by their education levels or types.     

Measuring Community Economic Resilience in Australia: Estimates of Recent Levels and Trends

We measure changes in community economic resilience (CER) across geo-locations in Australia between 2006 and 2011, a time span characterised by major natural and economic shocks. We build an index of potential CER that captures communities’ stocks of human, social, natural, physical and financial capitals, levels of economic diversity and accessibility to service centres. Using Census data and the ARIA index, we resort to principal component analysis to generate CER indexes at statistical area level 1, which is our community proxy. Our analysis of index values provides a number of useful insights. First, there was a statistically significant improvement over time in the overall CER index in all states and regions. Second, our CER measures improved at a different pace across regions and states while their rank remained mostly unchanged. Third, CER improved over time in social and physical capital and accessibility terms, but declined in human, natural, financial capital and diversity terms. Fourth, communities with a high economic diversity level reported higher capital stock except for natural capital, and communities with a low accessibility level had lower capital stock except for social and natural capital. Finally, CER has a long-term positive association with household income.     

Religion and Gender Equality Worldwide: A Country-Level Analysis

Conceptually, the Satisfaction with Life Scale (SWLS; Diener et al. in J Pers Assess 49(1):71–75, 1985) emphasizes evaluations comparing actual and expected life circumstances. Contrastingly we developed the Harmony in Life Scale (HILS) emphasizing psychological balance and flexibility in life. Study 1 (476 participants) developed the HILS. In Study 2 participants (N = 787, T1; N = 545, T2) answered well-being related questionnaires and generated words/texts related to HIL/SWL. The HILS yields satisfactory statistical properties, correlates as expected to well-being related scales, whilst HIL/SWL form a two-factor model. Hierarchical regressions reveal that HILS explains considerably more unique variance than SWLS in most included measures. Quantitative semantic analyses (employing latent semantic analyses) on words related to HIL/SWL reveal that they differ significantly in their semantic content. Word frequency analyses show that harmony significantly relate to peace, balance, etc. and satisfaction with job, money, etc. The HILS demonstrates validity, reliability, and uniqueness complementing the SWLS in forming a more holistic understanding of subjective well-being.     

Are Theories About Social Capital Empirically Supported? Evidence from the Farming Sector

Social capital is the bond that links societies together and without which there is little opportunity for economic growth or individual well-being. Thus, this paper aims to contribute to the literature by providing an analytically reliable concept of social capital and a methodological tool for empirically testing a theoretical model of how social capital is built. Based upon a decomposition of the concept of social capital characterising three main dimensions (i.e., structural, relational and cognitive), for each specific group of individuals under study the structural equation model allows us: (1) to confirm the multidimensional construct of social capital; (2) to measure the interrelation between its different attributes and; (3) to set a solid basis for additional research on the effects of social capital. This approach has been empirically applied to Andalusian (southern Spain) farmers as case study. We believe this research to be a fundamental starting point for informing social capital policymakers and helping them implement the necessary tools to facilitate sustainable development processes at different moments in time as it takes into account the multidimensional, contextual and dynamic nature of the concept.     

Can Governments Boost People’s Sense of Well-Being? The Impact of Selected Labour Market and Health Policies on Life Satisfaction

There is strong evidence that subjective well-being measures capture in a reliable way specific components of well-being that other non-subjective measures miss. The question of whether subjective well-being is policy amenable is however still largely unexplored in the research. This paper sheds some light on this issue, by looking at the impact of selected labour market and health policies on subjective well-being, using well-being data from the Gallup World Poll on the 34 OECD countries. The paper finds that the generosity of unemployment benefits and the strictness employment protection legislation affects positively life satisfaction, while out-of-pocket health expenses significantly reduce subjective well-being.     

On Exact Statistical Properties of Multidimensional Indices Based on Principal Components,Factor Analysis,MIMIC and Structural Equation Models

Recent empirical literature has seen many multidimensional indices emerge as well-being or poverty measures, in particular indices derived from principal components and various latent variable models. Though such indices are being increasingly and widely employed, few studies motivate their use or report the standard errors or confidence intervals associated with these estimators. This paper reviews the different underlying models, reaffirms their appropriateness in this context, examines the statistical properties of resulting indices, gives analytical expressions of their variances and establishes certain exact relationships among them.      

Does Good Governance Enhance Happiness: A Cross Nation Study

The purpose of this paper is to analyze the efficiency of the countries over the period of 10 years by applying data envelopment analysis (DEA). Based on rational and factual parameters such as freedom of press, freedom of religion, percentage of export in Gross Domestic Product (GDP), index of globalization, life expectancy at birth, gender ratio etc., this paper attempts to measure the efficiency of happiness. A combination of social and economic factors has been used to measure technical efficiency. The contribution of this paper is twofold. First, it measures the relative efficiency of all the countries included in the study. The nations have been ranked as per their relative efficiency and the peer group has been formed. Second a comparison between the rich and the poor countries have been done to test empirically whether the economic growth enhances the happiness among people. Presently, more than 3,000 studies have been published on happiness and Veenhoven in 2004 created a database called World Database of Happiness. The World Database of Happiness has attempted to present the available research findings on happiness. Part of the findings on happiness in nations is available in ‘States of nations’. For the research purpose, States of Nations and the data published by have been considered. Although happiness has been quantified and the existing literature has sufficient empirical evidences of the same, in the present context, the relative efficiency has been calculated for the countries on basis of objective and subjective happiness parameters. As per the literature, happiness has two aspects (1) objective and (2) subjective. Objective parameters are external to the individuals and covers material living parameters viz. GDP growth, income, nutrition, mortality rate, literacy etc. However, Subjective indicators measure the quality of life of the individuals. These are summarized as ‘‘subjective well-being’’. The various parameters considered in the study capture different aspects of happiness. The result shows how the government can increase the happiness of the people by analyzing the behavior and expectations. People express their preference explicitly about political parties, religion believes, law and order situation, trust in official institutions etc. Although, the behavior of people largely depends upon availability of goods and services in the market, the government can make budgets according to priority or preferences of people. Another way to increase happiness can be done by analyzing the peer group, which is an outcome of DEA. This shows the nations which are similar in terms of their economic and social conditions. The government can compare the prevailing conditions in different countries that improve the condition in their respective country. This could be an effective method as some of the parameters can be replicable in order to make people happier. The limitation of this study is lack of availability of data for many countries. As the number of countries increases, a change in the relative efficiency can be observed. Therefore, a future study can be conducted where the relevant data can be collected and a more global result can be obtained.     

A Decade of Sub-national Pro-poor Growth in Pakistan

The literature on subjective well-being has highlighted the negative effects associated with the restrictions and inequality imposed by the hukou system on China’s rural population. However, quantifying the cost of holding a rural hukou has generally been challenging because it can reflect unobserved individual characteristics related to educational and occupational choices. Thanks to RUMiC, a new longitudinal database on China, this limitation can be overcome by exploiting exogenous changes in hukou status due to land expropriation. The results support that receiving an urban hukou substantially enhances subjective well-being within the household, especially for males. The results complement a growing literature on subjective well-being focusing on China.     

Away from Dissatisfaction,Closer to Well-Being: A Multidimensional Synthetic Measure

As part of the international debate on methods for measuring the social progress of a population, there has been increasing interest in individual subjective opinions about different aspects of quality of life (elementary indicators). In the literature, many methods have been introduced for producing measures of subjective well-being based on these opinions. Some of these methods aim to construct synthetic measures that allow us to consider all the aspects simultaneously. This topic often requires subjective methodological choices and/or distributional assumptions and, when the opinions are encoded by means of categorical ordinal values, the eventual quantification of the original variables. Here, starting from the Istat multipurpose survey on households’—aspects of daily life, we propose an original method for constructing a global satisfaction index. We introduce a variable based on the joint distribution of all the elementary indicators that is able to express the individual degree of global satisfaction. This approach allows us to maintain the original ordinal data scale and to avoid any aggregation formula. By comparing the observed distribution of the new variable and the theoretical one, which refers to the situation of overall dissatisfaction (all individuals are dissatisfied for every aspect), we propose three indices of global satisfaction. We also implemented two simulation studies that confirms both the efficacy and robustness of our method. We then applied it to measure the global satisfaction degree of the Italian population, using Istat multipurpose survey data for the year 2013.     

Migrant Workers and Workplace Bullying in Urban China

Trends of subjective well-being (SWB) in transition countries are peculiar: they show substantial changes that are more strongly correlated with the trends of GDP than in other developed countries. This paper examines the role of the trends of GDP and of social trust in predicting the trends of well-being. We find that the strength of the relationship between social trust and SWB over the medium-term is comparable to that of GDP. We conclude that in the medium-term, even in countries where material concerns strongly affect well-being, social trust is a powerful predictor of the trends of SWB. However, in the short run the relationship between social trust and SWB does not hold and GDP stands out as the only significant correlate of SWB.     

Rethinking of Economic Growth and Life Satisfaction in Post-Wwii Japan – A Fresh Approach

Gross Domestic Product (GDP) has been utilized by academics and policy makers to indicate the economic well-being of the people. However, economic growth measures cannot capture fully the overall well-being of the people. This paper has tested quality of economic growth in Japan after World War II as to whether it has brought about positive outcome in the well-being of its citizens. Comparison between GDP and GPI (Genuine Progress Index) has revealed that GDP does not fit as well with people’s life satisfaction trend as GPI. Prefecture-based rankings on GDP, Human Development Index (HDI) and Life Satisfaction have shown that there are clear gaps between objective measures and subjective measures to indicate the overall well-being of the people. Also, analysis on major determinants for people’s life satisfaction reveals that older people, women, non-employed people, and those who live in subsidized housings felt satisfied with their life.     

The Geography of Economics and Happiness: Spatial Patterns in the Effects of Economic Conditions on Well-Being

This paper investigates the cross-country distribution of the relationship between economic conditions and well-being. Using a large sample of individuals from 94 countries worldwide, we find that the effect of income on well-being is larger in countries with lower GDP per capita, while the negative effect of being unemployed is stronger in countries with higher unemployment rate or higher GDP per capita. Interestingly, the effect of being unemployed displays positive spatial dependence across countries that is not accounted for by aggregate socio-economic conditions. Overall, the results indicate that geography, culture and institutions must be explicitly taken into account in order to understand the relationship between economic conditions and well-being.