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International Convergence in Well-Being Indicators

Abstract

We re-examine the concept of beta-convergence in living standards across countries during the period 1980–2012. In this study, well-being is assessed using the Human Development Index (HDI) which considers income aspects as well as social indicators, thus reflecting the multidimensional nature of this process. The existence of sigma convergence is evidenced in this study and hence beta convergence, as a necessary condition, is also pointed out. However, the linearity of this process has been questioned. Therefore, we apply a semiparametric specification of this process to the HDI and each of its intermediate indices. These models allows for nonlinearities in the estimation of the convergence speed. Our results reveal that absolute convergence in human well-being is satisfactorily represented by the conventional linear specification. However the income and education indices show nonlinear patterns. We also include structural variables to capture differences in the steady-state (conditional convergence). Under this model, convergence speed of all indicators is higher and the convergence process seems to be linear only for the health index.

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Notes

  1. This specification of convergence has been criticized for the so-called Galton’s fallacy problem and the inability to reflect the existence of multiple poles that might lead to multiple stable steady state equilibrium (See, e.g. Quah 1993, 1996).

  2. The upper bounds of all sub-indicators have been redefined in order to avoid the practice of capping variables at the top of the distribution. Consequently, the new bounds has lead an increase in the variability of the intermediate indices and hence in the HDI.

  3. The inclusion of other measures to determine the dispersion of the distribution, responds to the problems presented by the variance, which is “unsatisfactory in that were we simply to double everyone’s incomes (and thereby double mean income and leave the shape of the distribution essentially unchanged)” (Cowell 2011, 27).

  4. We include only dummies for these two regions since they show remarkable different convergence patterns than the rest of the world being characterized as the most unequal regions (see e.g. Chotikapanich et al. 2009).

  5. A number of studies demonstrated that there is a positive relationship between the EFW index and human well-being, see e.g. Goldsmith (1997), Gwartney and Lawson (2004), Gwartney et al (2010), Norton (1998).

  6. Note that Mayer-Foulkes (2010) focuses on the dimensions of the HDI rather than the composite index and then no global conclusions can be achieved in terms of well-being since these different components show different convergence patterns. In fact, as stated in this paper “Each human development component follows its own set of transitions”, Mayer-Foulkes (2010, pp. 28).

  7. For a detailed explanation of the procedure for testing the null hypothesis of non-significance of the variance component in linear mixed models with one variance component see Crainiceanu and Ruppert (2004). In that paper the finite and asymptotic distribution of the RLRT is derived to provide consistent results.

  8. Note that in Decancq et al. (2009) the sensibility of the results to different trade-offs between dimensions is investigated in relation to the evolution of multidimensional inequality in well-being convergence. Actually, multidimensional inequality is beyond de scope of this paper. In any case, it should be stated that if we apply unidimensional inequality measures to the HDI, we are assuming some degree of substitution and complementarity among dimensions since the composite indicator follows a Cobb–Douglas type function.

  9. The Atkinson index is decomposable but not additively, and then an interaction term is involved. The Gini index can be additively decomposable if there is no overlapping between groups, but since we are considering a regional classification, this is not the case.

  10. The acceleration of the convergence process under the conditional framework is a common result in the literature (see Noorbakhsh (2006) and Konya and Guisan (2008) for examples related to convergence in human well-being). Note that the absolute model implies that all countries converge to the same steady state, while the consideration of structural variables allows for the existence of multiple steady state equilibrium. Then, only countries that share these characteristics are converging to the same steady state, and this process should be faster than universal convergence.

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Acknowledgments

The authors thank the Ministerio de Economía y Competitividad (Project ECO2010-15455) and the Ministerio de Educación (FPU AP-2010-4907) for partial support of this work. Authors are grateful for the constructive suggestions provided by the reviewers, which improved the paper substantially.

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Correspondence to José María Sarabia.

Appendix: Regions and Countries Included

Appendix: Regions and Countries Included

Western Europe, North America, and Oceania: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea (republic of), Luxembourg, Malta, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom, United States
Arab States: Algeria, Bahrain, Egypt, Israel, Jordan, Morocco, Qatar, Saudi Arabia, Sudan, Syrian Arab Republic, Tunisia, Yemen, United Arab Emirates
East Asia and the Pacific: Brunei Darussalam, China, Fiji, Hong Kong, Indonesia, Kiribati, Lao People’s Democratic Republic, Malaysia, Mongolia, Myanmar, Papua New Guinea, Philippines, Thailand, Tonga, Viet Nam
Europe and Central Asia: Albania, Armenia, Bulgaria, Cyprus, Estonia, Latvia, Lithuania, Moldova (Republic of), Montenegro, Romania, Russian Federation, Slovenia, Slovakia, Tajikistan, Turkey, Ukraine
Latin America and the Caribbean: Argentina, Belize, Bolivia (Plurinational State of), Brazil, Chile, Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, El Salvador, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Trinidad and Tobago, Uruguay, Venezuela (Bolivarian Republic of)
South Asia: Afghanistan, Bangladesh, India, Iran (Islamic Republic of), Nepal, Pakistan, Sri Lanka
Sub-Saharan Africa: Benin, Botswana, Burundi, Cameroon, Central African Republic, Congo, Democratic Republic of the Congo, Cote d’Ivoire, Gabon, Gambia, Ghana, Kenya, Lesotho, Liberia, Malawi, Mali, Mauritania, Mauritius, Mozambique, Namibia, Niger, Nigeria, Rwanda, Senegal, Sierra Leone, South Africa, Swaziland, Tanzania (United Republic of), Togo, Uganda, Zambia, Zimbabwe

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Jordá, V., Sarabia, J.M. International Convergence in Well-Being Indicators. Soc Indic Res 120, 1–27 (2015). https://doi.org/10.1007/s11205-014-0588-8

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Keywords

  • Well-being
  • Beta-convergence
  • Sigma-convergence
  • Semiparametric regression
  • Human Development Index