Social Choice and Welfare

, Volume 30, Issue 1, pp 119–173 | Cite as

Cross-country determinants of life satisfaction: exploring different determinants across groups in society

  • Christian Bjørnskov
  • Axel Dreher
  • Justina A. V. Fischer
Original Paper


This paper explores a wide range of cross-country determinants of life satisfaction exploiting a database of 90,000 observations in 70 countries. We distinguish four groups of aggregate variables as potential determinants of satisfaction: political, economic, institutional, and human development and culture. We use ordered probit to investigate the importance of these variables on individual life satisfaction and test the robustness of our results with Extreme Bounds Analysis. The results show that only a small number of factors, such as openness, business climate, postcommunism, the number of chambers in parliament, Christian majority, and infant mortality, robustly influence life satisfaction across countries while the importance of many variables suggested in the previous literature is not confirmed. This remains largely true when the analysis splits national populations according to gender, income, and political orientation also.


Life Satisfaction Income Inequality Public Debt Veto Player World Value Survey 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Alesina A, Devleeschauwer A, Easterly W, Kurlat S, Wazciarg R (2003) Fractionalization. J Econ Growth 8:155–194CrossRefGoogle Scholar
  2. Alesina A, DiTella R, MacCulloch R (2004) Inequality and happiness: are Europeans and Americans different?. J Publ Econ 88:2009–2042CrossRefGoogle Scholar
  3. Alt J, Lowry R (1994) Divided governments, fiscal institutions and budget deficits: evidence from the states. Am Polit Sci Rev 88:811–828CrossRefGoogle Scholar
  4. Bauman Z (1998) Globalisation. Polity Press, CambridgeGoogle Scholar
  5. Bardhan P (1997) The role of governance in economic development, a political economy approach. OECD Development Center, ParisGoogle Scholar
  6. Bawn K (1999) Money and majorities in the Federal Republic of Germany: evidence for a veto players model of government spending. Am J Polit Sci 43:707–736CrossRefGoogle Scholar
  7. Beck Th, Clarke G, Groff A, Keefer Ph, Walsh P (2001) New tools in comparative political economy: the database of political institutions. World Bank Econ Rev 15:165–176CrossRefGoogle Scholar
  8. Becker GS (1968) Crime and punishment: an economic approach. J Polit Econo 76:169–193CrossRefGoogle Scholar
  9. Bergh A (2006) Explaining welfare state survival: the role of economic freedom and globalization. Ratio Working Papers 101, Ratio InstituteGoogle Scholar
  10. Besley T, Coate S (1998) Sources of inefficiency in a representative democracy: a dynamic analysis. Am Econ Rev 88:139–156Google Scholar
  11. Besley T, Coate S (1997) An economic model of representative democracy. Quart J Econ 112:85–114CrossRefGoogle Scholar
  12. Bjørnskov C (2003) The happy few: cross-country evidence on social capital and life satisfaction. Kyklos 56:3–16CrossRefGoogle Scholar
  13. Bjørnskov C (2005) Investigations in the economics of social capital. PhD Thesis, Aarhus School of BusinessGoogle Scholar
  14. Bjørnskov C (2006) Globalization and economic freedom: new evidence using the Dreher Index. Mimeo, Aarhus UniversityGoogle Scholar
  15. Bjørnskov C, Dreher A, Fischer JAV (2005) Cross-country determinants of life satisfaction: exploring different determinants across groups in society. Working Paper Series 2005–19, Department of Economics, University of St. GallenGoogle Scholar
  16. Bjørnskov C, Dreher A, Fischer JAV (2006) On gender gaps in life satisfaction: does discrimination matter? MimeoGoogle Scholar
  17. Bjørnskov C, Dreher A, Fischer JAV (2007) The bigger the better? Evidence of the effect of government size on life satisfaction around the world. Public Choice 127(3):267–292CrossRefGoogle Scholar
  18. Brennan G, Buchanan JM (1980) The power to tax. Analytical foundations of a fiscal constitution. Cambridge University Press, CambridgeGoogle Scholar
  19. CIA (2005) The CIA World Factbook 2004. Central Intelligence Agency, Washington, DCGoogle Scholar
  20. Clark A, Lelkes O (2005) Deliver us from evil: religion as insurance. PER Working Paper 06/03, European Center for Social Welfare Policy and ResearchGoogle Scholar
  21. de Haan J, Sturm J-E (1997) Political and economic determinants of budget deficits and government spending: a reinvestigation. Euro J Polit Econ 13:739–775CrossRefGoogle Scholar
  22. Diener Ed, Seligman MEP (2004) Beyond money: toward an economy of well-being. Psychol Sci Publ Inter 5:1–31CrossRefGoogle Scholar
  23. DiTella R, MacCulloch RJ, Oswald AJ (2001) Preferences over inflation and unemployment. evidence from surveys of happiness. Am Econ Rev 91:335–341CrossRefGoogle Scholar
  24. DiTella R, MacCulloch RJ, Oswald AJ (2003) The macroeconomics of happiness. Rev Econ Stat 85:809–825CrossRefGoogle Scholar
  25. Dixit A, Norman V (1980) Theory of international trade. Cambridge University Press, CambridgeGoogle Scholar
  26. Dixit A, Stiglitz J (1977) Monopolistic competition and optimum product variety. Am Econ Rev 67:297–308Google Scholar
  27. Dorn D, Fischer JAV, Kirchgässner G, Sousa-Poza A (2006) Is it culture or democracy? The impact of democracy and culture on happines., Soc Indicat Res, doi: 10.1007/s11205-006-9048-4Google Scholar
  28. Downs A (1957) An economic theory of democracy. Harper and Row, New YorkGoogle Scholar
  29. Dreher A (2006a) The influence of globalization on taxes and social policy—an empirical analysis for OECD countries. Eur J Polit Econ 22, 1:179–201CrossRefGoogle Scholar
  30. Dreher A (2006b) Does globalization affect growth? Evidence from a new index of globalization. Appl Econ 38, 10:1091–1110CrossRefGoogle Scholar
  31. Dreher A, Gaston N (2006) Has globalisation increased inequality? KOF Working Paper 140, ETH ZurichGoogle Scholar
  32. Easterlin R (1995) Will raising the incomes of all increase the happiness of all?. J Econ Behav Organizat 27:35–47CrossRefGoogle Scholar
  33. Feinberg RE (2006) Presidential mandates and ministerial institutions: summitry of the Americas, the Organization of American States (OAS) and the Inter-American Development Bank (IDB). Rev Int Organizat 1. 1:69–94CrossRefGoogle Scholar
  34. Ferguson N (2004) Empire: How Britain made the modern world. Penguin Press, LondonGoogle Scholar
  35. Fernández C, Ley E, Steel MFJ (2001) Model uncertainty in cross-country growth regressions. J Appl Econ 16:563–576CrossRefGoogle Scholar
  36. Fischer JAV, Rodriguez A (2006) Political institutions and suicide: a regional analysis of Switzerland. Unpublished manuscript, London School of Economics and Royal Economic Society Annual Conference 2007Google Scholar
  37. Fox C, Kahneman D (1992) Correlations, causes and heuristics in surveys of life satisfaction. Soc Indicat Res 27:221–234Google Scholar
  38. Freedom House (2005) Freedom of the press 2005. A global survey of media independence. Rowman and Littlefield, LanhamGoogle Scholar
  39. Freedom House. (2005) Freedom in the world 2005. The annual survey of political rights and civil liberties. Rowman and Littlefield, LanhamGoogle Scholar
  40. Frey B, Stutzer A (2006) Mispredicting utility and the political process. In: McCaffery EJ, Slemrod J (eds) Behavioral public finance. Russell Sage Foundation, New York, pp. 113–140Google Scholar
  41. Ganghof St (2003) Promises and pitfalls of veto player analysis. Swiss Polit Sci Rev 9:1–25Google Scholar
  42. Graham C, Pettinato S (2001) Happiness, markets, and democracy: Latin America in comparative perspective. J Happi Stud 2:237–268CrossRefGoogle Scholar
  43. Gwartney J, Lawson R (2002) Economic freedom of the world: 2002 annual report. Fraser Institute, VancouverGoogle Scholar
  44. Hayek F. von (1939) The economic conditions of interstate federalism. Reprinted in F. von Hayek, Individualism and Economic Order, Chap. 12. University of Chicago Press, Chicago, 1948Google Scholar
  45. Hayo B (2004) Happiness in Eastern Europe. Working Paper 12/2004, Phillips Universität MarburgGoogle Scholar
  46. Helliwell JF (2003) How’s life? Combining individual and national variables to explain subjective well-being. Econ Modell 20:331–336CrossRefGoogle Scholar
  47. Heston A, Summers R, Aten B (2002) Penn world tables, Version 6.1. Center for International Comparisons (CICUP), University of Pennsylvania, OctoberGoogle Scholar
  48. Inglehart R, Basañez M, Díez-Medrano J, Halman L, Luijkx R (2004) Human beliefs and values. University of Michigan Press, Ann ArborGoogle Scholar
  49. Irwin FW (1944) The realism of expectations. Psychol Rev 51:120–126CrossRefGoogle Scholar
  50. Kaufmann D, Kraay A, Mastruzzi M (2003) Governance matters III: governance indicators for 1996–2002. World Bank Policy Research Working Paper 3106Google Scholar
  51. Keefer P, Knack S (2002) Polarization, politics and property rights: links between inequality and growth. Publ Choice 111:147–154CrossRefGoogle Scholar
  52. König Th (2001) Bicameralism and party politics in Germany: an empirical social choice analysis. Polit Stud 49:411–437CrossRefGoogle Scholar
  53. Kontopoulos Y, Perotti R (1999) Government fragmentation and fiscal policy outcomes: evidence from OECD countries. In: Poterba JM, von Hagen J (eds) Fiscal institutions and fiscal performance. Chicago University Press, Chicago, 81–102Google Scholar
  54. Lamla M (2005) Long-run determinants of pollution: a robustness analysis. Mimeo, ETH ZurichGoogle Scholar
  55. Lalive R, Stutzer A (2004) The role of social work norms in job searching and subjective well-being. J Euro Econ Assoc 2:696–719CrossRefGoogle Scholar
  56. Layard R (2006) Happiness and public policy: A challenge to the profession. The Econ J 116: C24–C33CrossRefGoogle Scholar
  57. Leamer EE (1983) Let’s take the con out of econometrics. Am Econ Rev 73:31–43Google Scholar
  58. Lancaster K (1980) Intra-industry trade under monopolistic competition. J Int Econ 10:151–175CrossRefGoogle Scholar
  59. Levine R, Renelt D (1992) A sensitivity analysis of cross-country growth regressions. Am Econ Rev 82:942–963Google Scholar
  60. Lijphart A (1977) Democracy in plural societies. Yale University Press, New HavenGoogle Scholar
  61. Marshall MG, Jaggers K (2000) Polity IV project: political regime characteristics and transitions, pp 1800–2000. Scholar
  62. McCubbins M (1991) Government on the lay-away: federal spending and deficits under divided party control. In: Cox G, Kernell S (eds) The politics of divided government. Westview Press, BoulderGoogle Scholar
  63. Ng Y-K (1997) A case for happiness, cardinalism, and interpersonal comparability. Econ J 107:1848–1858CrossRefGoogle Scholar
  64. Ng Y-K (2003) From preference to happiness: towards a more complete welfare economics. Soc Choice Welf 20:307–50CrossRefGoogle Scholar
  65. Niskanen W (1975) Bureaucrats and politicians. J Law Econ 18:617–643CrossRefGoogle Scholar
  66. Oates, Wallace E (1972) Fiscal federalism. Hartcourt, New YorkGoogle Scholar
  67. Ovaska T, Takashima R (2006) Economic policy and the level of self-perceived well-being: an international comparison. J Socio-Econ 35:308–325CrossRefGoogle Scholar
  68. Oswald AJ (1997) Happiness and economic performance. Econ J 107:1815–1831CrossRefGoogle Scholar
  69. Putnam R (1993) Making democracy work. Princeton University Press, PrincetonGoogle Scholar
  70. Romer Th, Rosenthal H (1978) Political resource allocation, controlled agendas, and the Status Quo. Publ Choice 33:27–43CrossRefGoogle Scholar
  71. Roubini N, Sachs J (1989) Political and economic determinants of budget deficits in the industrial democracies. Euro Econ Rev 33:903–938CrossRefGoogle Scholar
  72. Sala-i-Martin X (1997) I just ran two million regressions. Am Econ Rev 87:178–183Google Scholar
  73. Schyns P (1998) Crossnational differences in happiness: economic and cultural factors explored. Soc Indicat Res 43:3–26CrossRefGoogle Scholar
  74. Sturm J-E, Berger H, de Haan J (2005) Which variables explain decisions on IMF credit? An extreme bounds analysis. Econ Polit 17. 2:177–213CrossRefGoogle Scholar
  75. Sturm JE, de Haan J (2001) How robust is Sala-i-Martin’s robustness analysis. Mimeo, University of GroningenGoogle Scholar
  76. Sturm JE, de Haan J (2005) Determinants of long-term growth: new results applying robust estimation and extreme bounds analysis. Empir Econ 30(3):597–617CrossRefGoogle Scholar
  77. Stutzer A (2004) The role of income aspirations in individual happiness. J Econ Behav Organizat 54:89–109CrossRefGoogle Scholar
  78. Teksoz U, Sanfey P (2005) Does transition make you happy? EBRD Working Paper, March 2005Google Scholar
  79. Temple J (2000) Growth regressions and what the textbooks don’t tell you. Bull Econ Res 52:181–205CrossRefGoogle Scholar
  80. Transparency International (2005), Transparency International corruption perceptions index 2005. Press Release, October 18Google Scholar
  81. Tsai M-C (2007) Does globalization affect human well-being? Soc Indicat Res 81:103–126CrossRefGoogle Scholar
  82. Tsebelis G (1995) Decision making in political systems: Veto players in presidentialism, parliamentarism, multicameralism and multipartyism. Brit J Polit Sci 25:289–325CrossRefGoogle Scholar
  83. Tullock G (1959) Problems with majority voting. J Polit Econ 67:571–579CrossRefGoogle Scholar
  84. Tullock G (1981) Why so much stability? Publ Choice 37:189–202CrossRefGoogle Scholar
  85. UNU (2005) World income inequality database v2.0. United Nations University-World Institute for Development Economics Research, HelsinkiGoogle Scholar
  86. USDS (2005) International religious freedom report 2005. United States Department of State, Washington, DCGoogle Scholar
  87. Veenhoven R (2000a) The four qualities of life: ordering concepts and measures of the good life. J Happ Stud 1:1–39CrossRefGoogle Scholar
  88. Veenhoven R (2000b) Well-being in the welfare state: level not higher, distribution not more equitable. J Comparat Policy Anal 2:91–125CrossRefGoogle Scholar
  89. Volkerink B, de Haan J (2001) Fragmented government effects on fiscal policy: new evidence. Publ Choice 109:221–242CrossRefGoogle Scholar
  90. Weingast BR, Shepsle KA, Johnsen C (1981) The political economy of benefits and costs: a neoclassical approach to distributive politics. J Polit Econ 89:642–664CrossRefGoogle Scholar
  91. World Bank (2005) World development indicators. CD-ROM and on-line database, Washington, DCGoogle Scholar

Copyright information

© Springer-Verlag 2007

Authors and Affiliations

  • Christian Bjørnskov
    • 1
  • Axel Dreher
    • 2
  • Justina A. V. Fischer
    • 3
  1. 1.Aarhus School of BusinessAarhusDenmark
  2. 2.KOF Swiss Economic InstituteETH ZurichZürichSwitzerland
  3. 3.Hoover InstitutionStanford UniversityStanfordUSA

Personalised recommendations