Why better governance improves wellbeing

People’s evaluations of the quality of their own lives provide reliable and inexpensive new ways to show how and how much good governance matters (Bryson et al. 2014). Life evaluations complement and encompass more established indicators of economic and social progress (OECD 2013). Such evaluations focus on life as a whole, thereby permitting income, health, trust, freedom, and social relations to be consistently taken into account. Survey-based life evaluations, thus, provide a research basis for establishing what matters most.

Governance quality and wellbeing

In recent research, we use the largest available sets of national-level measures of the quality of governance. We assessed how these measures 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 previously analysed in some detail in the World Happiness Report 2013.

• The results confirm earlier findings that the delivery quality of government services dominates democratic quality in supporting better lives. [1], [2]

There is, however, some difference in relative importance as development proceeds, with democratic quality having a positive influence among countries that have already achieved higher levels of development, measured either by per capita incomes or the delivery quality of government services.

• The new results show not just that people are more satisfied with their lives in countries having better governance quality, but also that actual changes in governance quality since 2005 have led to large changes in the quality of life.

This provides much stronger evidence that governance quality can be changed, and that these changes have much larger effects than those flowing simply through a more productive economy.

For example, the ten countries that improved the most in terms of delivery quality changes between 2005 and 2012, when compared to the ten countries with most deteriorated 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. When we explain changes in average life evaluations over the 2005 to 2012 period, just as much was explained by changes in governance quality as by changes in GDP, even though some of the wellbeing benefits of better governance are delivered through increases in economic efficiency and, hence, GDP per capita. Our new results thus confirm that quality of governance affects lives via many channels beyond those captured by GDP per capita, and also that important improvements can be achieved within policy-relevant time horizons.

Other factors affecting wellbeing

• Additional wellbeing benefits can arise where nations have stronger social fabrics that enable them to better weather economic or other crises.

These benefits lie above and beyond those already found to flow from more traditional measures of governance quality. Thus, while four Eurozone countries had drops of life evaluations much larger than could be explained by their large income losses and increases in unemployment (see Figure 1 and Table 2.2 in World Happiness Report 2013), there were other countries severely damaged by the global financial crisis – Ireland and Iceland – where despite severe damage to their banking systems and economic performance, average life evaluations fell only slightly. [3]

In the Gallup World Poll data, Ireland and Iceland rank right at the top in terms of social support, as measured by the proportion of respondents who feel they have someone to count on in times of trouble. The wellbeing benefits of these social connections become obvious, and they are probably appreciated more, when crises arise to give them a chance to show their value.

Trust in others has been repeatedly found to be a vital support for happier lives (Helliwell and Wang 2011). This trust takes many forms, ranging from the comforting thought that friends and relatives are ready to help in times of need, to belief in the generosity of strangers willing to pick up and return a lost wallet, and the belief that the word of a colleague or business associate can be relied upon, to broader trust in public institutions and governments. While the evidence shows that all these forms of trust are important, trust in one’s environment of friends, neighbours, and workmates matters most. This is important information for policymakers who can help to design policies that both build and make use of the constructive capacities of community-level connections and engagement.

Trust in the quality, completeness, and fairness of broader public institutions is also an important part of the overall support for better lives. Our new results show that changes in public confidence in national institutions are important sources of changes in life evaluations even after account has been taken of the effects of changes in delivery quality, GDP per capita, and social support. That confidence in public institutions has importance even beyond the conventional measures of the delivery quality of government services suggests that some important ingredients are missed by the conventional measures. We argue, based on a variety of findings in wellbeing research, attention needs to be paid to the ‘how’ as well as the ‘what’ of public services.

In Part III of our OECD paper (Helliwell et al. 2014a), we extend our analysis beyond the current governance quality data to suggest ways in which the design and delivery of public services can be changed to improve lives in all countries. We consider a variety of relevant examples, including prison reforms in Singapore, macroeconomic policies in Korea, the delivery of elder care, and how to design and deliver on-the-job training in more collaborative and effective ways (see Figure 1). But these are only examples drawn from a much larger set of possibilities, as there is no element of governance that would not look different from a wellbeing perspective.

Figure 1. Actual vs. predicted happiness changes in 130 countries, 2005-07 to 2010-12 (0 for missing values)

Policy suggestion

What are the specific policy suggestions that flow from our analysis?

• First, currently available evidence about the linkages between good governance and subjective wellbeing is strong enough to justify building a national research base that would permit the measurement and unpacking of life evaluations in all parts of a nation, and among all demographic and other subgroups of the population.

It is not enough to collect good data on how people assess their lives; it is equally important to collect these evaluations jointly with information about the key variables supporting better lives, with special attention to those measures of trust, belonging, and social connections that have been too long ignored in official statistical surveys.

• Second, the great importance attached to delivery quality, relative to the electoral aspects of governance, especially among those countries still struggling to build or rebuild the honesty and efficiency of their public services, suggests a parallel ordering of policy priorities.
• Third, people value living where there is less inequality in the distribution of wellbeing, and where the government’s social insurance and income-support systems are more complete.

Attention to the latter aspect of policy design would also tend to reduce inequality in the distribution of wellbeing, as would attempts to enable those worst off to participate directly in the design and delivery of services to themselves and especially others.

• Fourth, the emerging importance of the ‘how’ of public service delivery, and the value of enabling individuals and communities to help each other develop better lives, suggests that each public service deserves fundamental review of how such services should be designed and delivered.

In our view, this would be done best not by expert panels or commissions, but by encouraging innovation and experimentation at the local level, thereby finding out at low cost, on a step-by-step basis, which innovations are most deserving of broader application.

Looking ahead, we see much need and many opportunities for learning exactly how the design and operation of public and private institutions affect the quality of peoples’ lives, as seen by them. This knowledge can be best acquired by a collaborative combination of four types of innovation: broader official collection of wellbeing data, local experimentation with alternative ways of doing things, broader sharing of information about what works best to improve wellbeing, and field trials of the most promising options.

References

Bryson A, J Forth, and L Stokes (2014), “Does it pay for workers to invest in their workers’ wellbeing?”, VoxEU.org, 17 November

Helliwell, J F and H Huang (2008), “How’s your government? International evidence linking good government and wellbeing”, British Journal of Political Science 38, 595-619.

Helliwell, J F, R Layard, and J Sachs (Eds.) (2012). World Happiness Report.

Helliwell, J F, R Layard, and J Sachs (Eds.) (2013). World Happiness Report 2013.

Helliwell, J F and S Wang (2011), “Trust and wellbeing”, International Journal of Wellbeing 1(1), 42-78.

Helliwell, JF and S Wang (2012), “The State of World Happiness”, In Helliwell, J F, R Layard, and J Sachs (Eds.) World Happiness Report, 10-57.

Helliwell, J F, H Huang, S Grover and S Wang (2014a), “Good governance and national wellbeing: what are the linkages?”, OECD Working Papers on Public Governance, No. 25, OECD Publishing.

Helliwell, J F, H Huang, S Grover and S Wang (2014b), “Empirical linkages between good governance and national wellbeing”, NBER Working Papers 20686.

Kaufmann, D, A Kraay and M Mastruzzi (2009), “Governance matters VIII: Aggregate and individual governance indicators, 1996-2008”, World Bank Policy Research Working Paper No. 4978.

OECD (2013), OECD Guidelines on Measuring Subjective Wellbeing. OECD Publishing.

Footnotes

[1] Reported in full in Helliwell et al. (2014a,b)

[2] Delivery quality is represented by the average of separate measures for government effectiveness, regulatory quality, rule of law, and control of corruption. Democratic quality is an average of two measures, one for voice and accountability, and the other for political stability and absence of violence. These data are drawn from the Kaufman et al. (2009). World Bank governance indicators, as used both in Helliwell and Huang (2008) and in Parts I and II of Helliwell et al. (2014a,b)

[3] The Figure shows the actual and predicted changes in national average Cantril ladder scores from 2005-07 to 2010-2012 reported in Figure 2.6 of World Happiness Report 2013. If all changes were exactly as predicted by the model of column 1 of Table 2.1 of WHR 2013, then all points would lie on the line. For individual countries, the model explains about one-quarter of the actual changes, while on a regional basis the explained proportion rises to about three-quarters.

Published in collaboration with VoxEU

Author: John Helliwell is an Arthur J.E. Child Foundation Fellow of the Canadian Institute for Advanced Research. Haifang Huang is an Assistant professor in the Department of Economics at the University of Alberta. Shawn Grover is a Policy Analyst in the Financial Institutions Division at the Department of Finance, Canada. Shun Wang is an Assistant Professor at the School of Public Policy and Management at the Korea Development Institute.

Image: A man poses for photos as solar halo is seen in the sky of Brasilia September 30, 2011. REUTERS/Ueslei Marcelino.