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Increasing attention is being paid in academic, policy, and public arenas to subjective measures of well-being. This promising trend represents a shift towards mea- suring positive outcomes in psychology and greater realism in the study of economic behaviour. We describe the main measures of subjective well-being (SWB) and provide ex- amples of policy-relevant research findings, including new accountings of the differences in individual-level SWB assessments around the world and across Canada. These suggest a consistent pattern of life circumstances linked to SWB and highlight the importance of social factors whose role has otherwise been hard to quantify in income-equivalent terms.

This paper takes a different tack in addressing one of the fundamental questions in economics: what are the factors that determine the distribution of jobs and wages? In Adam Smith%u2019s classic formulation, and in much of the subsequent literature, wage levels have been used to estimate the values of job characteristics ("compensating" or "equalizing" differentials). There are econometric problems with this approach, principally caused by unmeasured differences in talents and aptitudes that enable people of high ability to have jobs with both high wages and good working conditions, thus understating the value of working conditions. We bypass this difficulty by estimating the extent to which incomes and job characteristics influence direct measures of life satisfaction from three large and recent Canadian surveys. The well-being results show strikingly large values for non-financial job characteristics, especially workplace trust and other measures of the quality of workplace social capital. The compensating differentials estimated for the quality of workplace social capital are so large as to suggest that they do not reflect a full equilibrium. Thus the current situation probably reflects the existence of unrecognized opportunities for managers and employees to alter workplace environments, or for workers to change jobs, so as to increase both life satisfaction and workplace efficiency.

Education is one of the most important predictors—usually, in fact, the most important predictor—of many forms of political and social engagement—from voting to chairing a local committee to hosting a dinner party to trusting others. Over the last half century (and more) educational levels in the United States have risen sharply. In 1960 only 41 percent of American adults had graduated from high school; in 1998 82 percent had. In 1960 only 8 percent of American adults had a college degree; in 1998 24 percent had. Yet levels of political and social participation have not risen pari passu with this dramatic increase in education, and by some accounts [Putnam, 1995a; 1995b; 2000] have even fallen. For at least two decades, political scientists have mused about this paradoxical “puzzle” [Brody, 1978]. Recently, however, Norman Nie, Jane Junn, and Kenneth Stehlik-Barry [1996, hereafter NJS-B] have offered an elegant and potentially powerful resolution to this paradox, beginning with a crucial distinction between the “relative” and “absolute” effects of education. If more people now have a college degree, they argue, perhaps the sociological signifi cance of the credential has been devalued. Social status is, for example, associated with education, but we would not assume that just because more Americans are educated than ever before, America has a greater volume of social status than ever before. To the extent that education is merely about sorting people, not about adding to their skills and knowledge and civic values, then no puzzle remains to be explained. In fact, NJS-B conclude, participation is affected primarily by relative educational levels, and thus has not been (and should not have been expected to be) rising with aggregate educational levels. The distinction that NJS-B have introduced is important. Education has external effects, as well as internal ones. In principle, my behavior can be affected not only by my education, but also by that of others around me. The core issue is whether (holding constant my own education), I am more likely or less likely to participate politically and socially if those around me become more educated. Besides its academic inter

In this paper we estimate the size of weekend effects for seven emotions and then explore their main determinants for the working population in the United States, using the Gallup/Healthways US Daily Poll 2008-2012. We first find that weekend effects exist for all emotions, and that these effects are not explained by sample selection bias. Full-time workers have larger weekend effects than do part-time workers. We then explore the sources of weekend effects and find that workplace trust and workplace social relations, combined with differences in social time spent with family and friends, together almost fully explain the weekend effects for happiness, laughter, enjoyment and sadness, for both full-time and part-time workers, with significant but smaller proportions explained for the remaining three emotions-worry, anger and stress. Finally, we show that workplace trust and social relations significantly improve emotions and life evaluations on both weekends and weekdays for all workers.

This article summarises recent empirical research on the determinants of subjective well-being. Results from national and international samples suggest that measures of social capital, including especially the corollary measures of specific and general trust, have substantial effects on well-being beyond those flowing through economic channels. Cross-national samples (supported by parallel analysis of suicide data) show large well-being effects from the quality of government. Finally, using well-being data to estimate the income-equivalents non-financial aspects of the workplace produces numbers so large as to suggest the existence of unexploited opportunities to improve both employee satisfaction and enterprise efficiency.

Helliwell traces the changes that have occurred at the Bank of Canada since the early 1960s, when he first began a long and extensive relationship with the institution and its staff. He begins with his work on the Royal Commission on Banking and Finance (the Porter Commission) and continues over the next 40 years, giving particular focus to the Bank's analytic and research activities. Although he is careful to note the benefits of alternative analytical and information-gathering techniques, such as the extensive mail and direct interview survey that he and his colleagues conducted as part of the Royal Commission, Helliwell devotes most of his attention to the Bank's econometric modelling efforts, starting with RDX1 and RDX2 in the late 1960s and early 1970s. He cites some of the internal, as well as external, obstacles that had to be overcome as the Bank's modelling efforts advanced, and how shifting trends in the economics profession have sometimes posed a challenge. Helliwell concludes that these developments helped the Bank to come of age and take its place in the front ranks of the world's evidence-based policy-research institutions.

Recent evidence indicates that the intensity of economic exchange within and across borders is significantly different: linkages are much tighter within, than among, nation-states. These findings, however, do not necessarily imply that borders and separate national currencies represent significant barriers to trade that should be removed, since the evidence is also consistent with the alternative hypothesis, that domestic exchange is more efficient because domestic producers are better able to satisfy the requirements of local consumers, owing to common tastes and institutions and the existence of local information and social networks. Focusing primarily on trade linkages within and between Canada and the United States, the authors review the evidence on the extent to which national borders lessen the intensity of international economic linkages, primarily trade in goods and services, and the effects on domestic welfare. They also examine the evidence on the impact of common currencies on trade and welfare. They determine that, since the empirical models employed to date in this research cannot distinguish between alternative explanations of the evidence, it is not yet possible to draw firm conclusions for policy-making.

This paper attempts to explain international and inter-personal differences in subjective well-being over the final fifth of the twentieth century. The empirical work makes use of data from three waves of the World Values survey covering about fifty different countries. The analysis proceeds in stages. First there is a brief review of some reasons for giving a key role to subjective measures of well-being. This is followed by a survey of earlier empirical studies, a description of the main variables used, a report of results and tests, and discussion of the links among social capital, education, income and well-being. The main innovation of the paper, relative to earlier studies of subjective well-being, lies in its use of large international samples of data combining individual and societal level variables, thus permitting the simultaneous identification of individual-level and societal-level determinants of well-being. This is particularly useful in identifying the direct and indirect linkages between social capital and well-being.

The paper deals with three issues that are central to the combined use of intranational and international data to estimate the economic consequences of national borders. The first issue concerns the measurement of trading distances for transactions that take place within a country or region. The second issue relates to the use of coefficients from an estimated gravity relationship to express the border effect in terms of an equivalent distance. The author proposes a technique to avoid problems that have beset earlier attempts to do this. The third issue is the need to ensure that the border and distance effects are estimated independently.

Subjective well-being research has often found that marriage is positively correlated with well-being. Some have argued that this correlation may be result of happier people being more likely to marry. Others have presented evidence suggesting that the well-being benefits of marriage are short-lasting. Using data from the British Household Panel Survey, we control individual pre-marital well-being levels and find that the married are still more satisfied, suggesting a causal effect, even after full allowance is made for selection effects. Using new data from the United Kingdom's Annual Population Survey, we find that the married have a less deep U-shape in life satisfaction across age groups than do the unmarried, indicating that marriage may help ease the causes of the mid-life dip in life satisfaction and that the benefits of marriage are unlikely to be short-lived. We explore friendship as a mechanism which could help explain a causal relationship between marriage and life satisfaction, and find that well-being effects of marriage are about twice as large for those whose spouse is also their best friend. Finally, we use the Gallup World Poll to show that although the overall well-being effects of marriage appear to vary across cultural contexts, marriage eases the middle-age dip in life evaluations for all regions except Sub-Saharan Africa.

This paper first reviews existing studies of the links between good governance and subjective well-being. It then brings together the largest available sets of national-level measures of the quality of governance to assess the extent to which they contribute to explaining the levels and changes in life evaluations in 157 countries over the years 2005-2012, using data from the Gallup World Poll. The results show not just that people are more satisfied with their lives in countries with better governance quality, but also that actual changes in governance quality since 2005 have led to large changes in the quality of life. For example, the ten-most-improved countries, in terms of delivery quality changes between 2005 and 2012, when compared to the ten countries with most worsened delivery quality, are estimated to have thereby increased average life evaluations by as much as would be produced by a 40% increase in per capita incomes. The results also confirm earlier findings that the delivery quality of government services generally dominates democratic quality in supporting better lives. The situation changes as development proceeds, with democratic quality having a positive influence among countries that have already achieved higher quality of service delivery.

The paper was prepared by John F. Helliwell, Haifang Huang, Shawn Grover and Shun Wang in collaboration with Mario Marcel, Martin Forst and Tatyana Teplova. This paper has three main objectives. The first is to review existing studies of the links between good governance and subjective well-being. The second is to bring together the largest available sets of nationallevel measures of the quality of governance, and to assess the extent to which they contribute to explaining the levels and changes in life evaluations in 157 countries over the years 2005-2012, using data from the Gallup World Poll already analysed in some detail in the World Happiness Report 2013. The third objective is to use subjective well-being research to suggest ways in which governance can be changed so as to improve lives in all countries, as measured by peoples’ own evaluations. The paper starts with a summary of the evidence and policy implications. There follow the four main sections of the paper, a statistical appendix containing a broad range of data and results, and an extensive annotated bibliography of empirical literature linking good governance and subjective well-being.

Individuals, communities, and governments are increasingly interested in using subjective wellbeing measures, based on how individuals rate the quality of their own lives, to supplement or even supplant more conventional economic measures of individual and social progress. This flowering of interest has naturally sparked efforts to increase the quality and quantity of subjective wellbeing data, research, and policy analysis. Thus it is a good time to take stock of what is known and what most needs to be done to move the analysis and policy agendas from demonstrated interest to well-founded change. This chapter starts by reviewing a range of the most policy-relevant measures of subjective wellbeing, then outlines some research results with direct bearing on policy issues, and finally illustrates how these results, and others like them, can be used to improve evidence-based policy choices by governments, companies, and communities.

In this paper we suggest an improved methodology for comparing the intensity of trade across and within national and provincial boundaries. Earlier efforts to assess border effects for provinces or for countries without internal trade statistics made fairly arbitrary assumptions about average distances for internal trade flows. We improve on earlier efforts by taking more complete account of the distribution of population within each province or country. Internal distance is estimated as a population-weighted average of intra-city and intercity distances as well as distances to and within rural areas. We find higher estimates of internal distances, and hence border effects, than found in previous studies.

The border between Canada and the United States has been described as a one-way mirror, with Canadians situated at the back of the mirror, wellinformed and unreflected, and Americans who happen to look northward seeing only reflections of themselves. The truth of this metaphor can be illustrated in many ways, and it helps to explain much about economic, social and political life in Canada. For example, Canada has always been one of the world’s most cabled countries, so that television sets all over the country have all of the U.S. channels as well as the smaller number of Canadian channels. Even on the Canadian channels, many of the most watched programs are American, and even the Canadian-origin news has heavy emphasis on U.S. affairs. In a sense, Canadians have broader access to U.S. news than do Americans, since Canadians see U.S. news through both U.S. and Canadian lenses. In the reverse direction, the amount of Canadian news on U.S. channels is essentially zero, beyond the allusions to the origins of the worst winter storms. Direct access to Canadian channels is also very limited, with Canadian channels absent from almost all U.S. cable systems. This asymmetry is more than a matter of relative size, or else California, with the population of Canada, would be equivalently represented on the U.S. nightly news. It is also much larger than can be explained by national border effects, since the latter generally reflect each country’s activities back to its own residents, rather than being porous when headed in one direction and almost impermeable when headed in the other. A full explanation is likely to require a combination of national border effects plus a center-periphery model of outward information flow of the sort emphasized by

The paper first extends and reconciles recent estimates of the strikingly large effect of national borders on trade patterns. Estimates comparing trade among Canadian provinces with that between Canadian provinces and U.S. states show interprovincial trade in 1988-90 to have been more than twenty times as dense as that between provinces and states, with some evidence of a downward trend since, due to the post-FTA growth in trade between Canada and the United States. Using approximate data for the volumes and distances of internal trade in OECD countries, the 1988-92 border effect for unrelated OECD countries is estimated to exceed 12. Both types of data confirm substantial border effects, even after accounting for common borders and language, with the directly-measured data for interprovincial and province-state trade producing higher estimates." Initial estimates from a census-based gravity model of interprovincial and international migration show a much higher border effect for migration, with interprovincial migration among the Anglophone provinces almost 100 times as dense as that from U.S. states to Canadian provinces. Effects of migration on subsequent trade patterns are found for international but not for interprovincial trade, suggesting the existence of nationally-shared networks the large national border effects for trade flows.

A recent large Canadian survey permits us to compare face-to-face ('real-life') and on-line social networks as sources of subjective well-being. The sample of 5,000 is drawn randomly from an on-line pool of respondents, a group well placed to have and value on-line friendships. We find three key results. First, the number of real-life friends is positively correlated with subjective well-being (SWB) even after controlling for income, demographic variables and personality differences. Doubling the number of friends in real life has an equivalent effect on well-being as a 50% increase in income. Second, the size of online networks is largely uncorrelated with subjective well-being. Third, we find that real-life friends are much more important for people who are single, divorced, separated or widowed than they are for people who are married or living with a partner. Findings from large international surveys (the European Social Surveys 2002-2008) are used to confirm the importance of real-life social networks to SWB; they also indicate a significantly smaller value of social networks to married or partnered couples.

This research provides the first support for a possible psychological universal: Human beings around the world derive emotional benefits from using their financial resources to help others (prosocial spending). In Study 1, survey data from 136 countries were examined and showed that prosocial spending is associated with greater happiness around the world, in poor and rich countries alike. To test for causality, in Studies 2a and 2b, we used experimental methodology, demonstrating that recalling a past instance of prosocial spending has a causal impact on happiness across countries that differ greatly in terms of wealth (Canada, Uganda, and India). Finally, in Study 3, participants in Canada and South Africa randomly assigned to buy items for charity reported higher levels of positive affect than participants assigned to buy the same items for themselves, even when this prosocial spending did not provide an opportunity to build or strengthen social ties. Our findings suggest that the reward experienced from helping others may be deeply ingrained in human nature, emerging in diverse cultural and economic contexts.

NBER WORKING PAPER SERIESHOW MUCH IS SOCIAL CAPITAL WORTH?John F. HelliwellChristopher P. Barrington-LeighWorking Paper 16025http://www.nber.org/papers/w16025NATIONAL BUREAU OF ECONOMIC RESEARCH1050 Massachusetts AvenueCambridge, MA 02138May 2010We are grateful for invaluable access to the Gallup World Poll, and to Canadian GSS17 data throughthe UBC Research Data Centre supported by Statistics Canada. This paper is part of the ‘Social Interactions,Identity and Well-Being’ research program of the Canadian Institute for Advanced Research (includinga Junior Fellowship award for Chris Barrington-Leigh), and is supported also by grants from the SocialSciences and Humanities Research Council of Canada. We have been much aided also by the adviceof Jolanda Jetten, Alex Haslam and Cath Haslam. The views expressed herein are those of the authorsand do not necessarily reflect those of the National Bureau of Economic Research.NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies officialNBER publications.© 2010 by John F. Helliwell and Christopher P. Barrington-Leigh. All rights reserved. Short sectionsof text, not to exceed two paragraphs, may be quoted without explicit permission provided that fullcredit, including © notice, is given to the source.

This paper uses data from global and Canadian surveys data to estimate the powerful linkages between social connections, their related social identities, and subjective well-being. Our explanatory variables include several measures of the extent and frequency of use of social networks, combined with a number of measures of general and domain-specific trust, which are often used to gauge effective social capital. Using these measures we find that trust and social network size and use are all strong predictors of subjective well-being. We demonstrate the size and impact of these effects by calculating compensating differentials, measured as the changes in household income that would produce equivalent levels of life satisfaction. We introduce three key measures of social identity - the respondents' sense of belonging to their communities, province and country - and find that they add significantly to the explanation of life satisfaction among Canadian respondents, and provide important mediating channels whereby social capital is linked to subjective well-being.

This paper presents new evidence linking trust and subjective well-being, based primarily on data from the Gallup World Poll and cycle 17 of the Canadian General Social Survey (GSS17). Because several of the general explanations for subjective well-being examined here show large and significant linkages to both household income and various measures of trust, it is possible to estimate income-equivalent compensating differentials for different types of trust. Measures of trust studied include general social trust, trust in co-workers, trust in neighbours, and trust in police. In addition, some Canadian surveys and the Gallup World Poll ask respondents to estimate the chances that a lost wallet would be returned to them if found by different individuals, including neighbours, police and strangers. Our results reveal sufficiently strong linkages between trust and well-being to support much more study of how trust can be built and maintained, or repaired where it has been damaged. We therefore use data from the Canadian GSS17 to analyze personal and neighbourhood characteristics, including education, migration history, and mobility, that help explain differences in trust levels among individuals. New experimental data from Canada show that wallets are far more likely to be returned, even by strangers in large cities, than people expect.

Increasing attention is being paid in academic, policy, and public arenas to subjective measures of well-being. This promising trend represents a shift towards measuring positive outcomes in psychology and greater realism in the study of economic behaviour. After a general review of past and potential uses for subjective well-being data, and a discussion of why some economists have previously been sceptical of SWB data, we present global and Canadian examples from our own research to illustrate what can be learned. Differences in subjective well-being will be shown to be large and sustained across individuals, communities, provinces and nations. Although the patterns of subjective well-being are very different across Canada than across the world, we show that in both cases the differences can be fairly well accounted for by the same set of life circumstances. Our examples of policy-relevant research findings include new accountings of the differences in individual-level SWB assessments around the world and across Canada. These highlight the importance of social factors whose role has otherwise been hard to quantify in income-equivalent terms.

This chapter uses the first three waves of the Gallup World Poll to investigate differences across countries, cultures, and regions in the factors linked to life satisfaction, paying special attention to the social context. The principal findings are: First, using the larger pooled sample, the chapter finds that answers to the satisfaction with life and Cantril ladder questions provide consistent views of what constitutes a good life, with an average of the two measures providing a clearer picture than either measure on its own. Second, this chapter finds strong evidence for the importance of both income and social context variables in explaining within-country and international differences in well-being. For most specifications tested, the combined effects of a few measures of the social and institutional context are as large as those of income in explaining both international and intra-national differences in life satisfaction. Third, the very significant influences of both income and social factors permit the calculation of compensating differentials for social factors. We find very large income-equivalent values for key measures of the social context. Fourth, the international similarity of the estimated equations suggests that the large international differences in average life evaluations are not due to different approaches to the meaning of a good life, but to differing social, institutional, and economic life circumstances.

This chapter reviews the various definitions of well-being, and their advantages and disadvantages. Well-being is defined as an overall evaluation that an individual makes of his or her life in all its important aspects, and is often called “subjective well-being.” This definition is contrasted with objective evaluations, which require judgments that are independent of an individual’s values and desires. The definition of well-being advanced in this book is based on an individual’s own interests, needs, preferences, and desires, and is therefore similar to the concept of “utility” in economics. The well-being indicators advocated here include both people’s judgments of their lives and their emotions and moods. The differences in preference realization reflected in economic indicators and subjective reports of well-being are described, and the advantages and disadvantages of each are reviewed.

Besides concerns about measurement validity, a number of other potential problems are often believed to accompany the use of well-being measures to assist policy makers. One objection is that it is paternalistic for policy makers to be concerned with the well-being of individuals, and another concern is that people adapt to circumstances so that the objective conditions of a society are not reflected in people’s subjective evaluations of life. The underlying issue here is whether people’s well-being is so subject to comparisons—with other people, with one’s past, and with personal aspirations—that using the surveys to inform policy becomes unwise. Evidence is reviewed that certain conditions have enduring effects on well-being, and that subjective well-being is not completely relative. Thus, many of the concerns about using well-being for policy are exaggerated or unfounded.

Well-being measures can shed light on a large number of questions about diverse policy issues. Existing surveys are not sufficiently developed to offer definitive information, and therefore broad and ongoing accounts of well-being are needed. The well-being measures will not replace the information gained from existing social and economic measures but will complement it. The well-being measures have the ability to provide a broader perspective on quality of life than do measures that focus on a single objective such as economic growth. Although we do not fully understand well-being and the societal factors that influence it, it is nonetheless timely to implement national indicators of well-being because these measures are likely to inform the decisions of individual citizens as well as policy makers. Initial steps toward measuring societal well-being have already been taken in many nations, and show the promise of the well-being findings to create better policies. Although a full-blown set of national accounts of well-being are desirable, calculated steps to implement this goal incrementally can be taken, starting with the inclusion of life satisfaction and other measures in many ongoing studies and surveys.

Well-being has important influences on work life and the economy, which in turn have a large influence on people’s well-being. In this chapter several policy issues on which well-being findings shed light are presented. For example, the debilitating effects of unemployment on well-being are reviewed, and this is important as many economic models assume that people elect unemployment as the best way of maximizing their well-being given their current situation. The fact that unemployment has such a substantial impact on well-being indicates that minimizing it should be a policy imperative, although other considerations such as economic growth will also help shape policies in this area. Other issues that are discussed are the influence of worker satisfaction on job performance, the influence of risk sharing such as insurance on the ill-being resulting from natural disasters, and how graduated income taxes can affect the mean levels of well-being in societies.

Humans are social animals, and well-being therefore depends greatly on the quality of their social world. The idea of “social capital” is the claim that societies have a valuable resource in social relationships that are characterized by trust and trustworthiness, by collaboration and cooperation, and by a broad concern about helping the group. On the flip side, social capital is reduced by corruption and crime. The social capital of societies is linked to their health and well-being, and policies that undercut social capital can be disastrous even if they further other types of goals. By tracking both social capital and well-being, policy makers can create better regulations that increase social well-being rather than interfere with it. Well-being measures also provide a method of measuring the value of public services. An example for evaluating the outcomes of a social experiment—a program in Canada to reduce unemployment by assessing well-being before and after the program intervention—has been provided.

Although a disproportionate number of measures are used to assess the objective conditions of societies through social indicators, and ignore subjective well-being, there has been some progress in implementing subjective surveys of well-being. The chapter reviews instances where well-being is tracked on a broad basis. For example, the German Socio-Economic Panel Study assesses life satisfaction for a large and representative panel of Germans on an annual basis, as well as many other factors. Similar surveys in Australia and the United Kingdom reveal the potential implications that the initial attempts at assessing societal well-being can have for policy questions. The well-being measures allow a more in-depth understanding of how factors such as income and crime influence quality of life. The limitations of the existing surveys are reviewed, and recommendations for creating more sophisticated national accounts of well-being are advanced.

Subjective measures of well-being are important because they capture not simply objective circumstances, but people’s reactions to them. Thus, subjective measures provide information that is complementary to the objective ones. An advantage of subjective measures is that they reflect people’s desires and values, not just the judgments of the policy elites, and they are therefore inherently democratic in nature. Furthermore, subjective measures solve certain problems facing objective measures, such as how to make a complete list of them and how to weight them into an aggregate indicator of quality of life. Subjective measures can help policy makers when difficult trade-offs between policies exist. Subjective measures are essential when it is realized that societal well-being is not just an outcome of good conditions, but can also act as a causal factor in creating the conditions for peace and prosperity. Evidence for the positive effects of well-being on society in areas such as health, work performance, and cooperation are reviewed.

Health is now thought of as more than absence of disease, with positive health including feelings of well-being. Thus, subjective well-being is an inherent part of the health of societies. Importantly, research has now shown that high well-being can foster health and longevity, and that low well-being can impair the immune and cardiovascular systems, and have other deleterious effects on physical health. Another intersection between health and well-being is mental illness, which is a major cause of ill-being in industrialized societies. Thus, well-being is integral to disease prevention and health promotion, especially in the economically developed nations where epidemic diseases have been greatly reduced. Specific health policy issues are described, and how well-being can inform debates about policies directed at these issues is discussed. For example, the well-being of people with various diseases can be used to help more fairly allocate money to research on various medical conditions.

This chapter introduces the idea that measures of well-being provide information that can be useful to policy makers in enhancing quality of life by creating more astute policies and regulations. The themes of the chapters in the book, including the shortcomings of existing measures and how surveys of well-being can complement these limitations, are introduced. The chapters provide insights into why well-being measures are needed, and answer common objections to the measures. Policy issue examples are described, and the nature of the surveys that are needed is outlined.

Several conceptual concerns about using well-being measures to inform policy have been enunciated, and are discussed in this chapter. It is shown that well-being does not reflect a shallow form of hedonism, but instead reflects a desirable state that helps societies function more effectively. A related objection is that immoral behaviors that society cannot condone might sometimes lead to feelings of well-being. One answer to many of these objections is that both objective and subjective measures will be used in concert; that is, subjective measures will not replace the objective ones. This recognition undercuts many of the objections that have been raised. Some believe that policy makers might manipulate well-being, or, conversely, that citizens might alter their well-being responses to influence policy, and these critiques are discussed. Another issue is which types of well-being measures should be used, and it is argued that surveys should assess a number of different types of well-being.

A frequent concern about measures of well-being is that because they are subjective, they are unreliable and are subject to many types of artifacts and errors. The evidence for the validity and reliability of these measures is reviewed in this chapter, and the nature of measurement errors is discussed. The surveys of well-being are shown to be valid in predicting important outcomes such as suicide, and in correlating with other types of measures in a systematic way. Reports of well-being by respondents correlate with other types of measures such as biological assays and reports by knowledgeable informants. Although some measurement artifacts have been shown to influence the surveys of well-being, these often are not large, and the validity of the reports persists despite the measurement problems.

One of the most pressing policy concerns in the world is the health of the environment, and the problems for the environment caused by economic development and population growth. We describe four specific policy areas that might be enlightened by referring to well-being measures: the impact of aircraft noise, the effects of air pollution, problems arising in conjunction with commuting, and the influence of parks and green spaces on well-being. In each of these instances, existing well-being data indicate that the subjective well-being of people is influenced by environmental conditions, and measures of well-being are one method by which interventions to correct environmental problems can be assessed. Furthermore, well-being measures can help suggest which of various interventions might be most effective in ameliorating the problems. It is emphasized that the existing well-being data are often not sufficient for fully informing policy discussions. Rather, the potential for adequate data, when it becomes available, to inform policy is emphasized.

This paper uses the first three waves of the Gallup World Poll to investigate differences across countries, cultures and regions in the factors linked to life satisfaction, paying special attention to the social context. Our principal findings are: First, using the larger pooled sample, we find that answers to the satisfaction with life and Cantril ladder questions provide consistent views of what constitutes a good life, with an average of the two measures providing a clearer picture than either measure on its own. Second, we find strong evidence for the importance of both income and social context variables in explaining within-country and international differences in well-being. For most specifications tested, the combined effects of a few measures of the social and institutional context are as large as those of income in explaining both international and intra-national differences in life satisfaction. Third, the very significant influences of both income and social factors permit the calculation of compensating differentials for social factors. We find very large income-equivalent values for key measures of the social context. Fourth, the international similarity of the estimated equations suggests that the large international differences in average life evaluations are not due to different approaches to the meaning of a good life, but to differing social, institutional, and economic life circumstances.

This paper uses life satisfaction regressions based on three surveys in two countries (Canada and the United States) to estimate the relative values of financial and non-financial job characteristics. The well-being results show strikingly large values for non-financial job characteristics, especially workplace trust and other measures of the quality of social capital in workplaces. For example, an increase of trust in management that is about one tenth of the scale has a value in terms of life satisfaction equivalent to an increase of more than 30% in monetary income. We find that these values differ significantly by gender and by union status. We consider the reasons for such large values, and explore their implications for employers, employees, and policy-makers.

Departures from self-centred, consumption-oriented decision making are increasingly common in economic theory and are well motivated by a wide range of behavioural data from experiments, surveys, and econometric inference. A number of studies have shown large negative externalities in individual subjective well-being due to neighbours' incomes. These reflect the role of nearby households as comparison groups acting in individuals' reference-dependent preferences over income or consumption. At the same time, there are many reasons to expect positive spillovers from having prosperous neighbours. We combine high-resolution geographic data from three Canada-wide social surveys and the 2001 census to disentangle the spatial pattern of reference groups in urban areas and to identify channels of positive and negative spillovers on life satisfaction. We find evidence of significant effects of others' income at different scales and are able to reject a number of alternative explanations for the findings.

Departures from self-centred, consumption-oriented decision making are increasingly common in economic theory and are well motivated by a wide range of behavioural data from experiments, surveys, and econometric inference. A number of studies have shown large negative externalities in individual subjective well-being due to neighbours' incomes. These reflect the role of nearby households as comparison groups acting in individuals' reference-dependent preferences over income or consumption. At the same time, there are many reasons to expect positive spillovers from having prosperous neighbours. We combine high-resolution geographic data from three Canada-wide social surveys and the 2001 census to disentangle the spatial pattern of reference groups in urban areas and to identify channels of positive and negative spillovers on life satisfaction. We find evidence of significant effects of others' income at different scales and are able to reject a number of alternative explanations for the findings.

This paper argues that measures of life satisfaction, now being collected annually by the Gallup World Poll in more than 130 countries, permit a much broader view of the quality and consequences of development than other common measures. While these data show the importance of conventionally measured economic development, they also show the importance of many other elements of life that are also affected, whether deliberately or not, by community, national, and international institutions and policies. In estimating the importance of these other factors, this paper pays special attention to the social context of well-being: the norms, networks and relationships within which lives are lived.

This paper describes the structure of INTERMOD, a linked international model constructed at the Department of Finance using annual data. Our model follows closely the structure of a policy simulation model developed at the IMF (MULTIMOD), which employs a highly aggregated and common structure for each of the industrial countries. The most important difference is that INTERMOD has separate blocks for each of the G7 countries whereas MULTIMOD aggregates the four smaller countries (France, the UK, Italy and Canada) into a single region. Our discussion of the structure of INTERMOD focuses on the relationship between consumption and wealth, the role of fiscal policy in influencing aggregate demand, the specification of international linkages and the modelling of expectations. This is followed by a comparison of simulation results for INTERMOD, MULTIMOD and other linked international models. Operation of the model in a PC environment is then described. The paper concludes with a discussion of possible policy applications and avenues for further development. A detailed listing of simulation results and the model structure is provided in an appendix to the paper.

This article employs World Values Survey measures of life satisfaction as though they were direct measures of utility, and uses them to evaluate alternative features and forms of government in large international samples. Life satisfaction is found to be more closely linked to several World Bank measures of the quality of government than to real per capita incomes, in simple correlations and more fully specified models explaining international differences in life satisfaction. Differences in the relative importance of different aspects of good government are tested for, and a hierarchy of preferences that depends on the level of development is found. The ability of governments to provide a trustworthy environment, and to deliver services honestly and efficiently, appears to be of paramount importance for countries with worse governance and lower incomes. The balance changes once acceptable levels of efficiency, trust and incomes are achieved, when more value is attached to building and maintaining the institutions of electoral democracy.

Meissner and Taylor do a splendid job of making the history of the last great globalization relevant to the current great rebalancing. In their admirably understated way, they have argued that there is no credible evidence supporting the status quo, and have shown that the savings and investment patterns that mark today’s US current account deficit pose more problems for adjustment than were faced when the offshoot countries reversed their current account deficits so painlessly a century ago. I agree with them on both counts, and have learned much from their evidence and explanations.

This paper reviews the extent and policy implications of linkages between demographic changes and international factor mobility. Evidence is found of significant demographic effects on both migration and the current account, but for different reasons neither increased migration nor international transfers of savings is expected to offer much assistance in digesting the variety of demographic transitions expected over the next fifty years. The paper also examines more briefly the effects of demography on the factor content of international trade, as exemplified by offshore provision of back-office and other services previously provided closer to home.