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Formal Institutions and Subjective Well-Being: Revisiting the Cross-Country Evidence

  • Bjornskov, Christian
  • Dreher, Axel
  • Fischer, Justina AV

A long tradition in economics explores the association between the quality of formal institutions and economic performance. The literature on the relationship between such institutions and happiness is, however, rather limited, and inconclusive. In this paper, we revisit the findings from recent cross-country studies on the institutions-happiness association. Our findings suggest that their conclusions are qualitatively rather insensitive to the specific measure of ‘happiness’ used, while the associations between formal institutions and subjective well-being differ among poor and rich countries. Separating different types of institutional quality, we find that in developing countries the effects of economic-judicial institutions on happiness dominate those of political institutions, while analyses restricted to middle- and high-income countries show strong support for an additional beneficial effect of political institutions. Our results bear important implications which we discuss in the concluding section of the paper. This paper is the 2010-update of Bjørnskov, Dreher, Fischer (2008), Formal Institutions and Subjective Well-Being: Revisiting the Cross-Country Evidence, Working Paper Series in Economics and Finance 699, Stockholm School of Economics.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 20488.

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Date of creation: 2008
Date of revision: 06 Feb 2010
Handle: RePEc:pra:mprapa:20488
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