IDEAS home Printed from https://ideas.repec.org/p/mtu/wpaper/18_06.html
   My bibliography  Save this paper

Sustainable economic policy and well-being: The relationship between adjusted net savings and subjective well-being

Author

Listed:
  • Mubashir Qasim

    () (University of Waikato)

  • Arthur Grimes

    () (Motu Economic and Public Policy Research)

Abstract

We analyse the relationship between subjective wellbeing (SWB) and the World Bank’s measure of a country’s economic sustainability, adjusted net savings (ANS). We model SWB at individual level and at aggregated group level as a function of past ANS levels, after controlling for a country’s initial levels of SWB. The empirical models utilise World Values Surveys (WVS) data for self-reported life-satisfaction (our proxy for SWB). Our results show that ANS is negatively associated with future SWB outcomes over relatively short timespans (10-15 years) but this relationship is neutralised, or even reversed, for a longer timespan (20 years). The results demonstrate an important challenge in political economy. Governments that choose to save less in the short term may be able to spend more on the well-being of the current generation (i.e. current voters) but they diminish the reserves available to improve future generations’ well-being. At a more technical level, our results reinforce the concept that ANS is a useful sustainability indicator for infinite (or at least very long) time horizons, but it is not a good indicator of well-being developments over short time horizons.

Suggested Citation

  • Mubashir Qasim & Arthur Grimes, 2018. "Sustainable economic policy and well-being: The relationship between adjusted net savings and subjective well-being," Working Papers 18_06, Motu Economic and Public Policy Research.
  • Handle: RePEc:mtu:wpaper:18_06
    as

    Download full text from publisher

    File URL: http://motu-www.motu.org.nz/wpapers/18_06.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Heinz Welsch & Jan Kühling, 2016. "How Has The Crisis Of 2008–09 Affected Subjective Well-Being? Evidence From 25 Oecd Countries," Bulletin of Economic Research, Wiley Blackwell, vol. 68(1), pages 34-54, January.
    2. Hamilton, Kirk & Clemens, Michael, 1999. "Genuine Savings Rates in Developing Countries," World Bank Economic Review, World Bank Group, vol. 13(2), pages 333-356, May.
    3. Robert J. MacCulloch & Rafael Di Tella & Andrew J. Oswald, 2001. "Preferences over Inflation and Unemployment: Evidence from Surveys of Happiness," American Economic Review, American Economic Association, vol. 91(1), pages 335-341, March.
    4. Peggy Schyns, 2002. "Wealth Of Nations, Individual Income andLife Satisfaction in 42 Countries:A Multilevel Approach," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 60(1), pages 5-40, December.
    5. Jonathan A. Parker, 2000. "Spendthrift in America? On Two Decades of Decline in the U.S. Saving Rate," NBER Chapters,in: NBER Macroeconomics Annual 1999, Volume 14, pages 317-387 National Bureau of Economic Research, Inc.
    6. Betsey Stevenson & Justin Wolfers, 2008. "Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(1 (Spring), pages 1-102.
    7. Valerie Tiberius, 2004. "Cultural differences and philosophical accounts of well-being," Journal of Happiness Studies, Springer, vol. 5(3), pages 293-314, September.
    8. Matthias Blum & Cristián Ducoing & Eoin McLaughlin, 2016. "Genuine Savings in developing and developed countries, 1900-2000," Discussion Papers in Environment and Development Economics 2016-15, University of St. Andrews, School of Geography and Sustainable Development.
    9. Arrow, Kenneth J. & Dasgupta, Partha & Goulder, Lawrence H. & Mumford, Kevin J. & Oleson, Kirsten, 2012. "Sustainability and the measurement of wealth," Environment and Development Economics, Cambridge University Press, vol. 17(03), pages 317-353, June.
    10. Edward Deci & Richard Ryan, 2008. "Hedonia, eudaimonia, and well-being: an introduction," Journal of Happiness Studies, Springer, vol. 9(1), pages 1-11, January.
    11. David G. Blanchflower & Andrew J. Oswald, 2005. "Happiness and the Human Development Index: The Paradox of Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 38(3), pages 307-318, September.
    12. Guonan Ma & Wang Yi, 2010. "China’s High Saving Rate: Myth and Reality," International Economics, CEPII research center, issue 122, pages 5-39.
    13. Helliwell, John F., 2003. "How's life? Combining individual and national variables to explain subjective well-being," Economic Modelling, Elsevier, vol. 20(2), pages 331-360, March.
    14. Astra Bonini, 2008. "Cross-National Variation in Individual Life Satisfaction: Effects of National Wealth, Human Development, and Environmental Conditions," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 87(2), pages 223-236, June.
    15. repec:bla:jecsur:v:31:y:2017:i:4:p:1035-1061 is not listed on IDEAS
    16. Robert A. Cummins, 2012. "The determinants of happiness," International Journal of Happiness and Development, Inderscience Enterprises Ltd, vol. 1(1), pages 86-101.
    17. Azzi, Corry & Ehrenberg, Ronald G, 1975. "Household Allocation of Time and Church Attendance," Journal of Political Economy, University of Chicago Press, vol. 83(1), pages 27-56, February.
    18. Pezzey, J.C.V.John C. V., 2004. "One-sided sustainability tests with amenities, and changes in technology, trade and population," Journal of Environmental Economics and Management, Elsevier, vol. 48(1), pages 613-631, July.
    19. Vemuri, Amanda W. & Costanza, Robert, 2006. "The role of human, social, built, and natural capital in explaining life satisfaction at the country level: Toward a National Well-Being Index (NWI)," Ecological Economics, Elsevier, vol. 58(1), pages 119-133, June.
    20. Claudia Kettner & Angela Köppl & Sigrid Stagl, 2012. "List of well-being indicators," WWWforEurope Working Papers series 2, WWWforEurope.
    21. repec:cii:cepiie:2010-april-122-4 is not listed on IDEAS
    22. Ada Ferrer-i-Carbonell & Paul Frijters, 2004. "How Important is Methodology for the estimates of the determinants of Happiness?," Economic Journal, Royal Economic Society, vol. 114(497), pages 641-659, July.
    23. Hartwick, John M., 1990. "Natural resources, national accounting and economic depreciation," Journal of Public Economics, Elsevier, vol. 43(3), pages 291-304, December.
    24. Di Tella, Rafael & MacCulloch, Robert, 2008. "Gross national happiness as an answer to the Easterlin Paradox?," Journal of Development Economics, Elsevier, vol. 86(1), pages 22-42, April.
    25. Green, Tom L., 2013. "Teaching (un)sustainability? University sustainability commitments and student experiences of introductory economics," Ecological Economics, Elsevier, vol. 94(C), pages 135-142.
    26. Richard Easterlin, 2005. "Feeding the Illusion of Growth and Happiness: A Reply to Hagerty and Veenhoven," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 74(3), pages 429-443, December.
    27. Pearce, David W. & Atkinson, Giles D., 1993. "Capital theory and the measurement of sustainable development: an indicator of "weak" sustainability," Ecological Economics, Elsevier, vol. 8(2), pages 103-108, October.
    28. repec:cii:cepiei:2010-april-122-4 is not listed on IDEAS
    29. Hartwick, John M., 1990. "Natural Resources, National Accounting and Economic Depreciation," Queen's Economics Department Working Papers 273174, Queen's University - Department of Economics.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Adjusted net savings; subjective wellbeing; intergenerational sustainability;

    JEL classification:

    • L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
    • N97 - Economic History - - Regional and Urban History - - - Africa; Oceania

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mtu:wpaper:18_06. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Maxine Watene). General contact details of provider: http://edirc.repec.org/data/motuenz.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.