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Good Governance and National Well-Being: What Are the Linkages? OECD Working Papers on Public Governance No. 25 John F. Helliwell, Good Governance Haifang Huang, and National Well-being: Shawn Grover, What Are the Linkages? Shun Wang https://dx.doi.org/10.1787/5jxv9f651hvj-en OECD Working Papers should not be reported as representing the official views of the OECD or of its member countries. The opinions expressed and arguments employed are those of the authors. Working Papers describe preliminary results or research in progress by the author(s) and are published to stimulate discussion on a broad range of issues on which the OECD works. Comments on Working Papers are welcomed, and may be sent to the Public Governance and Territorial Development Directorate, OECD, 2 rue André-Pascal, 75775 Paris Cedex 16, France. OECD Working Papers on Public Governance No. 25 GOOD GOVERNANCE AND NATIONAL WELL-BEING: WHAT ARE THE LINKAGES? Validated for publication by Rolf Alter, Director, Public Governance and Territorial Development Directorate 1 WORKING PAPER "GOOD GOVERNANCE AND NATIONAL WELL-BEING: WHAT ARE THE LINKAGES?" John F. Helliwell, Haifang Huang, Shawn Grover and Shun Wang in collaboration with Mario Marcel, Martin Forst and Tatyana Teplova ABSTRACT 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 national- level 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. * OECD Working Papers should not be reported as representing the official views of the OECD or of its member countries. The opinions expressed and arguments employed are those of the authors. 2 TABLE OF CONTENTS SUMMARY AND POLICY IMPLICATIONS .............................................................................................. 4 PART I: SETTING THE STAGE ................................................................................................................... 7 Measures of well-being ................................................................................................................................ 7 Measures of government quality .................................................................................................................. 9 What connects good government to well-being? ....................................................................................... 10 Earlier studies often used only economic outcomes to link good governance and well-being .................. 11 Models for the relationship between good governance and well-being ..................................................... 13 PART II: THEORIES, MODELS AND EVIDENCE ................................................................................... 14 What are the key empirical linkages between the quality of governance and subjective well-being? ...... 14 Relationships between some features of governance and well-being ........................................................ 18 Inclusive institutions and inclusive law-making and policy-making processes ..................................... 18 Voting and political participation ........................................................................................................... 19 Fair playing field .................................................................................................................................... 19 Trust and the rule of law ........................................................................................................................ 20 Decentralization ..................................................................................................................................... 21 Reliability, responsiveness and effectiveness ........................................................................................ 21 Freedom .................................................................................................................................................. 22 Do the relationships differ by stage of development? ................................................................................ 22 PART III: LESSONS FROM WELL-BEING RESEARCH FOR BETTER WAYS OF GOVERNING .... 24 PART IV: POSSIBLE IMPLICATIONS FOR MEASUREMENT AND POLICY ..................................... 27 ANNEXES .................................................................................................................................................... 30 Table of Empirical Literature on Governance and Well-Being ................................................................. 30 Statistical Appendix ................................................................................................................................... 45 Tables – Statistical Appendix .................................................................................................................... 49 BIBLIOGRAPHY ......................................................................................................................................... 50 3 SUMMARY AND POLICY IMPLICATIONS1 This paper first sets the stage by making an evidence-based case that people’s own evaluations of the quality of their lives provide reliable and inexpensive new ways to show how, and how much, good governance matters. These well-being measures complement and encompass more established indicators of economic and social progress. Their encompassing capacity is based on their focus on life as a whole, thereby permitting economics, health, trust, freedom and social relations to be consistently taken into account, using survey-based life evaluations as the research base to establish what matters most. The paper then brings together the largest available sets of national-level measures of the quality of governance, and assesses 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 results confirm earlier findings that the delivery quality2 of government services dominates democratic quality in supporting better lives. There is, however, some difference in relative importance as development proceeds, with democratic quality having a positive influence among countries that have already achieved reasonably high per capita incomes. The new results are able to 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-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. 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 well-being 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. 1 Author affiliations: Helliwell, Canadian Institute for Advanced Research (CIFAR) and Vancouver School of Economics, UBC; Huang, Department of Economics, University of Alberta; Grover, Vancouver School of Economics, UBC; Wang, Korea Development Institute (KDI) School of Public Policy and Management. The authors are grateful to the Gallup Organization for access to data from the Gallup World Poll, to CIFAR and the KDI for research support, and to Carol Graham, David Gyarmati, Jon Hall, Charles Montgomery, Tom Sander, Alois Stutzer and Conal Smith for helpful comments on earlier drafts. OECD Working Papers should not be reported as representing the official views of the OECD or of its member countries. The opinions expressed and arguments employed are those of the authors. 2 Delivery quality is represented by the average of separate measures for government effectives, regulatory quality, rule of law and control of corruption. Democratic quality is an average of two
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