IZA DP No. 10774: Sometimes Your Best Just Ain't Good Enough: The Worldwide Evidence on Well-Being Efficiency
published in: B.E. Journal of Economic Analysis & Policy, 2021, 21(1), 83-114
Despite the burgeoning happiness economics literature, scholars have largely ignored explorations of how individuals or countries translate given resources into well-being. Using a balanced panel on 91 countries from Gallup Analytics between 2009â€“2014 and borrowing insights from production theory, we investigate whether nations in our sample efficiently convert their current resources (i.e. income, education and health) into subjective well-being. Our results imply that well-being efficiency gains are possible worldwide. We find that unemployment and involuntary part-time employment are associated with lower efficiency, while good institutions as proxied by the rule of law, as well as social support and freedom perceptions improve it. Within-country investigations for Bulgaria â€“ an upper-middle-income country that often lurks at the bottom of the international well-being rankings â€“ demonstrate that efficiency is lower among the unemployed, divorced/separated, widowed, the old, large households and those with children, while living in a city, freedom, generosity and social support improve efficiency. This paper provides the first evidence from an international panel concerning the issue of whether higher well-being levels are possible with current resources and raises policy-relevant questions about the appropriate instruments to improve well-being efficiency.