nep-hap New Economics Papers
on Economics of Happiness
Issue of 2010‒11‒13
sixteen papers chosen by
Viviana Di Giovinazzo
University of Milano-Bicocca

  1. The Political Economy of Human Development By Robin Harding; Leonard Wantchekon
  2. Human Development in the Middle East and North Africa By Djavad Salehi-Isfahani
  3. The disconnect between indicators of sustainability and human development By Ricardo Fuentes-Nieva; Isabel Pereira
  4. Designing the Inequality-Adjusted Human Development Index (IHDI) By Sabina Alkire; James Foster
  5. How to Include Political Capabilities in the HDI? An Evaluation of Alternatives By José Antonio Cheibub
  6. Twenty Years of Human Development in Six Affluent Countries: Australia, Canada, Japan, New Zealand, the United Kingdom, and the United States. By Sarah Burd-Sharps; Kristen Lewis; Patrick Guyer; Ted Lechterman
  7. The long run impact of child abuse on health care costs and wellbeing in Australia. CHERE Working Paper 2010/10 By Rebecca Reeve; Kees van Gool
  8. El debate sobre los regímenes de bienestar de Europa a América Latina. Algunas sugerencias para el análisis del caso argentino By Giuseppe Manuel Messina
  9. Medir mejor para un desarrollo sostenible. La dimensión democrática ausente en el IDH By Rafael Domínguez Martín; Marta Guijarro Garvi
  10. Measuring Economic Insecurity and Vulerability as Part of Economic Well-Being: Concepts and Context By Lars Osberg
  11. Risk Attitudes and Well-Being in Latin America By Cardenas, Juan Camilo; Carpenter, Jeffrey P.
  12. Inequality at Work: The Effect of Peer Salaries on Job Satisfaction By David Card; Alex Mas; Enrico Moretti; Emmanuel Saez
  13. Maximizing Human Development By Merwan Engineer; Ian King
  14. RDP and quality of life in rural areas: evaluation of the possible effects in Piedmont By Cagliero, Roberto; Filippa, Francesca; Pierangeli, Fabio
  15. Multifunctional Agriculture, Quality of Life and Policy Decisions: an Empirical Case By Eboli, M.G.; Macri, M.C.; Micocci, A.; Verrecchia, F.
  16. Efficiency in human development: A Data Envelopment Analysis By Valérie Vierstraete

  1. By: Robin Harding (New York University); Leonard Wantchekon (New York University)
    Abstract: What are the causes and consequences of human development? In the twenty years since the publication of the first Human Development Report (HDR), political scientists have invested a great deal of time and effort into answering this question. So what do we know? In this paper we seek to review these labors, the fruits of which can be summarized as follows. Democracy causes, but is not caused by, economic development. While total economic growth is no higher as a result of democratic institutions, they are more conducive than non-democratic alternatives to the growth of per capita income, which is an important aspect of individual well-being. Democratic institutions are also conducive to improvements in the two other essential elements of human development, longevity and knowledge - democracy has a positive effect on indicators of education and health. Given these findings, it seems pertinent to ask why democracy has such effects. Our conclusion from the literature is that the positive impact of democratic institutions stems from their provision of accountability structures. But in providing these structures, what democracy offers is the opportunity for human development. It is no guarantee of its realization, and in the absence of factors such as information and participation this opportunity can be missed.
    Keywords: Human Development, Democracy, Political Institutions, Accountability, Income, Education, Health.
    JEL: I00 O11 O12
    Date: 2010–10
  2. By: Djavad Salehi-Isfahani (Virginia Tech and Brookings Institution)
    Abstract: Middle East and North African countries (MENA) have achieved much to be proud of in human development. Falling child mortality and fertility have transformed family structures in most MENA countries. Despite important advances in health, education, and income, there are certain aspects human development in which MENA countries have not progressed as far. There are inequalities in human development regionally, within each country and for specific demographic groups, most importantly for youth and women. In this paper I review the record of human development in the MENA region to highlight areas in which the region has been more successful, as well those in which human development has lagged in absolute terms or relative to economic growth. I draw attention to certain important characteristics of the region that distinguish it from other developing regions, in particular the presence of oil income and delayed demographic transition.
    Keywords: Human development, Middle East and North Africa, Youth.
    JEL: O15 N35 J13 J16 J21 J24
    Date: 2010–10
  3. By: Ricardo Fuentes-Nieva (Regional Bureau for Africa at UNDP); Isabel Pereira (Human Development Report Office ay UNDP)
    Abstract: This paper presents an initial review of the theoretical and measurement discussions of sustainability and its relation to human development. As we show in this paper, there is an overall consensus about the importance of sustaining development and well-being over time, but in reality different development paradigms lead to different definitions and measures of sustainability. We review some of those measures, among which the Adjusted Net Savings (a green national accounting measure calculated by the World Bank and rooted in a weak concept of sustainability), the Ecological Footprint (calculated by the Global Footprint Network and rooted in a strong concept of sustainability, where environment is considered a critical resource), and the carbon dioxide emissions (a simple environmental indicator, used in international debate of climate change). Our analysis shows conflicting conclusions when studying the correlations between these indicators of sustainability and existing human development indicators, namely HDI, which emphasizes the need for further analysis to understand what “sustainable human development” means. Nevertheless, as we show here, over time there has been a close link between higher economic performance and energy consumption, which has been mostly based in the use of fossil fuels.
    Keywords: sustainability, human development, measurement, energy.
    JEL: O13 Q56 Q59
    Date: 2010–10
  4. By: Sabina Alkire (Oxford Poverty and Human Development Initiative at Oxford University); James Foster (George Washington University and Oxford Poverty & Human Development Initiative)
    Abstract: As a measure of wellbeing, national income misses variations in the things income can and cannot buy. It also misses variations in people’s claim on that aggregate income. The Human Development Index attempts to address the first weakness by incorporating two additional dimensions, health and education, into its informational bases. However, the second weakness, inequality, is ignored by the traditional HDI. In practical terms this means that any two countries having the same mean achievements will have the same HDI values even if they have very different distributions of achievements. This calls into question the accuracy of the HDI as a reflection of people’s actual achievements. This paper proposes a method for adjusting the HDI to reflect the distribution of human development achievements across the population, and across dimensions. We begin with a discussion of the proposed indices in an idealized setting where variables and their scales have been identified and the data are available. We then address the practical issues that must be addressed when applying these methods to real data. The final section presents and evaluates another related approach.
    Keywords: Human Development Index, inequality, multidimensional inequality measurement, capability approach, multidimensional welfare.
    JEL: I0 D63 O15 I3
    Date: 2010–10
  5. By: José Antonio Cheibub (Cline Center for Democracy at University of Illinois at Urgana-Champaign)
    Abstract: This paper evaluates existing measures of political regimes and political freedom with respect to their desirability as indicators of political capabilities. It argues that the focus of desirable measures should be on the political and civil institutions that affect individuals’ opportunities to pursue their goals (their capabilities). Attempts to capture “actual” capabilities are misleading since they replicate what the existing HDI already does and muddle a measure that derives power from its simplicity. The paper then suggests indicators that are intuitive, clear and sufficiently encompassing to capture the political and civil environment within which individuals must pursue their goals.
    Keywords: democracy, regime classification, civil and political freedom
    JEL: C80 O15
    Date: 2010–10
  6. By: Sarah Burd-Sharps (American Human Development Project); Kristen Lewis (American Human Development Project); Patrick Guyer (American Human Development Project); Ted Lechterman (American Human Development Project)
    Abstract: This paper argues that a capabilities-based approach to measuring human development, while predominantly utilized in the Global South, is pertinent to that of the Global North also. Using tools like the Human Development Index allows for a more comprehensive understanding of well-being than purely economic measurements like GDP, and better identifies areas of need within countries. Disaggregated findings of health, access to knowledge, and a decent standard of living—the basic building blocks of human development—show vast differences between and within six affluent nations (Australia, Canada, Japan, New Zealand, the United Kingdom, and the United States) that cannot be explained by economics alone. For example, the greatest spender on health care in the group, the United States, has the lowest life expectancy, while the lowest spender, Japan, has the highest health life expectancy. While the HDI’s indicators do not capture all factors of human freedoms and capabilities, individual proxies for human development within the Index can be altered to increase its relevance and utility to affluent countries. Replacing literacy, for example, with educational attainment, and expanding the combined gross enrollment ration to include pre-school students allow for a more dynamic consideration of access to knowledge. The HDI presents an innovative approach to measuring well-being within affluent nations, and paints a more detailed picture of human development than by just economic growth alone.
    Keywords: Human Development Index, OECD, Alternatives to GDP.
    JEL: A B I
    Date: 2010–10
  7. By: Rebecca Reeve (CHERE, University of Technology, Sydney); Kees van Gool (CHERE, University of Technology, Sydney)
    Abstract: There are approximately 55,000 substantiated child abuse or neglect cases in Australia each year, according to Australian Institute of Health and Welfare data, 2005-06 to 2008-09 (AIHW2010). In 2008-09, one third of child maltreatment cases related to physical or sexual abuse. Our paper examines the relationship between physical and sexual abuse of children and adult physical and mental health conditions and associated health care costs in Australia. The analysis utilises confidentialised unit record file data from the National Survey of Mental Health and Wellbeing 2007, which includes 8841 persons aged from 16 to 85. The econometric results indicate that Australians with a history of being abused as a child suffer from significantly more physical and mental health conditions as adults and incur higher annual health care costs. In addition, we investigate the associations between child abuse, incarceration and self harm and the intergenerational impact of abuse, to extend the understanding of the long run costs of child abuse in Australia. We conclude that prevention child abuse is expected to generate long term socio-economic benefits.
    Keywords: child abuse, mental health, costs, australia
    JEL: I30 I10
    Date: 2010–10
  8. By: Giuseppe Manuel Messina (Inst. Universitario de Investigación Ortega y Gasset - Fundación José Ortega y Gasset)
    Abstract: El trabajo parte de una revisión de la literatura sobre el Estado de bienestar en los países avanzados y su adaptación al estudio de los regímenes de bienestar en América Latina. Los aspectos principales que emergen de la literatura son contrastados con la evolución de Argentina en las últimas tres décadas. Una atención particular se presta a los cambios surgidos de la transición entre modelos de desarrollo a raíz de la implementación de las reformas estructurales de tipo neoliberal. El estudio concluye que un análisis del contexto socioeconómico en el que están inscritas las políticas sociales es fundamental para interpretarlas.
    Keywords: América Latina; Europa; Argentina; Estado del bienestar; Debate económico; Política económica
    Date: 2010
  9. By: Rafael Domínguez Martín (Departamento de Economía - Universidad de Cantabria); Marta Guijarro Garvi (Departamento de Economía - Universidad de Cantabria)
    Abstract: A pesar de los intentos de Naciones Unidas por conseguir una medida empírica y relativa del desarrollo humano, más allá de la simple consideración del progreso económico en términos de crecimiento y cambio estructural, el peso de la variable renta en la construcción del IDH es tan grande que este indicador sintético se hace cada vez más redundante, lo que es producto del carácter reduccionista de su medición. Se precisa, por tanto, una redefinición del IDH que ponga énfasis en la dimensión política que está en el origen de la definición misma de desarrollo humano.
    Keywords: América Latina y Caribe; Desarrollo humano; Indicadores; Índice de Desarrollo Humano; PIB per cápita; Democracia; IDHd
    Date: 2010
  10. By: Lars Osberg (Department of Economics, Dalhousie University)
    Keywords: economic insecurity; vulnerability; economic well-being; economic security; social protection; welfare state
    Date: 2010–11–04
  11. By: Cardenas, Juan Camilo (Universidad de los Andes); Carpenter, Jeffrey P. (Middlebury College)
    Abstract: A common premise in both the theoretical and policy literatures on development is that people remain poor because they are too impatient to save and too risk averse to take the sort of chances needed to accumulate wealth. The empirical literature, however, suggests that this assumption is far from proven. We report on field experiments designed to address many of the issues confounding previous analyses of the links between risk preferences and well-being. Our sample includes more than 3,000 participants who were drawn representatively from six Latin American cities: Bogotá, Buenos Aires, Caracas, Lima, Montevideo, San José. In addition to the experiment which reveals interesting cross-country differences, participants completed an extensive survey that provides data on a variety of well-being indicators and a number of important controls. Focusing on risk preferences, we find little evidence of robust links between risk aversion and well-being. However, when we analyze the results of three treatments designed to better reflect common choices made under uncertainty, we see that these, more subtle, instruments correlate better with well-being, even after controlling for a variety of other important factors like the accumulation of human capital and access to credit.
    Keywords: risk aversion, ambiguity aversion, loss aversion, risk pooling, well-being, Latin America
    JEL: C91 C93 D81 O12
    Date: 2010–10
  12. By: David Card (UC Berkeley); Alex Mas (Princeton University); Enrico Moretti (UC Berkeley); Emmanuel Saez (UC Berkeley)
    Abstract: Economists have long speculated that individuals care about both their absolute income and their income relative to others. We use a simple theoretical framework and a randomized manipulation of access to information on peers’ wages to provide new evidence on the effects of relative pay on individual utility. A randomly chosen subset of employees of the University of California was informed about a new website listing the pay of all University employees. All employees were then surveyed about their job satisfaction and job search intentions. Our information treatment doubles the fraction of employees using the website, with the vast majority of new users accessing data on the pay of colleagues in their own department. We find an asymmetric response to the information treatment: workers with salaries below the median for their pay unit and occupation report lower pay and job satisfaction, while those earning above the median report no higher satisfaction. Likewise, below-median earners report a significant increase in the likelihood of looking for a new job, while above-median earners are unaffected. Our findings indicate that utility depends directly on relative pay comparisons, and that this relationship is non-linear.
    Keywords: income, universities, wage information, job search, pay comparison
    JEL: J01 J31 J40 J24 J39
    Date: 2010–09
  13. By: Merwan Engineer; Ian King
    Abstract: The Human Development Index (HDI) is widely used as an aggregate measure of overall human well being. We examine the allocations implied by the maximization of this index, using a standard growth model — an extended version of Mankiw, Romer, andWeil’s (1992) model — and compare these with the allocations implied by the golden rule in that model. We find that maximization of the HDI leads to the overaccumulation of both physical and human capital, relative to the golden rule, and consumption is pushed to minimal levels. We then propose an alternative specification of the HDI, which replaces its income component with a consumption component. Maximization of this modified HDI yields a “human development golden rule” which balances consumption, education and health expenditures, and avoids the more extreme implications of the existing HDI.
    Keywords: Economic growth, Human Development Index, Planning
    Date: 2010
  14. By: Cagliero, Roberto; Filippa, Francesca; Pierangeli, Fabio
    Abstract: The research starts from the necessity to create specific tools for evaluating the impacts of rural development policies on fragile areas. The objective of this study is to exploit a synthetic measure of marginality, obtained through a specific tool set by IRES Piemonte (Institute of Socio Economic Research) as a proxy of quality of life indicators. The aim of this tool is to evaluate the potential effects of the measures programmed in axes 3 and 4 of Rural Development Programmes, in terms of changes in quality of life in rural areas. In the evaluation field, this methodology is applicated for the first time to Piedmontâs Rural Development Programme.
    Keywords: marginality, rural development, evaluation, territory, quality of life, Community/Rural/Urban Development, O180,
    Date: 2010–08
  15. By: Eboli, M.G.; Macri, M.C.; Micocci, A.; Verrecchia, F.
    Abstract: The TOP-MARD research project (Toward a Policy Model of Multifunctional Agriculture and Rural Development), that will be here described in its Italian version, links farmersâ behaviour with their economic, social and environmental effects, showing the difference between a behaviour guided by market profitability only and one guided by the interest of a broader social group. It was financed by EU in 11 European countries, and it took place in 2006-2008. The TOP-MARD research defined a 10-modules model (POMMARD), that links use of land and production techniques to several dimensions of a context (quantitative and qualitative, from economic to social and environmental) and to the quality of life of its population. STELLA, a Systems Thinking software, has been used in order to develop the POMMARD model. The POMMARD model is partially supply-driven with demand constraints: land use and its dynamics produce a mix of marketable and non-marketable goods, that impact other sectors and the territory through an I-O or a SAM, and through the consequences of their production on the quality of life. Labour requirements and demography can produce â therefore â immigration, and contribute to job creation and dynamics. Public intervention influences local resources and human behaviour. Farmers can choose their style of production and land use, that are the âkey driversâ of change: when land is converted from a land use to another or from a conventional to a non-conventional style of production, there occurs a change in the vector of inputs (means of production and workers) and in the vector of outputs, that also comprehends public goods. Provision of public goods increases the quality of life. Rural areas become therefore more attractive to younger generations, encouraging them to stay rather than migrate, and attracting new-comers. Tourism can also be influenced by the attractiveness of the area, which can contribute further income, within the limits of tourism capacity and seasonality. Starting from the actual systematic links, the model considers the main variables (population, income, â¦) under different policy scenarios: providing suggestions to policy makers about the possible effects of exogenous shocks, such as policy measures, on rural development and quality of life.
    Keywords: Multifunctional Agriculture, Quality of Life, Policy Decision., Agribusiness, Agricultural and Food Policy, Community/Rural/Urban Development, Food Consumption/Nutrition/Food Safety, Labor and Human Capital,
    Date: 2010–10–27
  16. By: Valérie Vierstraete (GREDI, Department of Economics, Université de Sherbrooke)
    Abstract: The human development index (HDI) is a measure of development published annually by the UNDP. This index allows countries’ development to be assessed on the basis of three indicators that measure the health, education, and standard of living of the population. The UNDP also computes a human development that excludes this last indicator, the HDI*. The global average of the HDI is approximately 0.75, but like the HDI*, it presents some striking inter-country disparities. In this study, we wish to demonstrate that efficiency in the utilization of public resources can have an incidence on HDI* scores. Thus, owing to a certain “waste” in their use of resources, countries with similar levels of government spending may end up with differing levels of human development. We measure this efficiency using the Data Envelopment Analysis (DEA) method. Relative efficiency in resource use is thus computed by comparing the countries in the study amongst themselves.
    Keywords: Data Envelopment Analysis, DEA, efficiency, development, human development index, HDI
    JEL: O15 O57
    Date: 2010–10–12

This nep-hap issue is ©2010 by Viviana Di Giovinazzo. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.