Tuesday, 16 August 2011

On globalisation and happiness

By Dirk Willenbockel

The latest issue of Economics Letters contains an article on Globalization’s winners and losers—Evidence from life satisfaction data, 1975–2001, which caught my attention by listing the cryptic proposition

“Trust in the WTO, the World Bank, and the IMF reinforces globalization’s positive effect on well-being”

among its research highlights. Not quite sure what to learn from this statement (other than some “Think positive – Don’t worry, be happy” message of the type to be found in the airport bookshop self-help literature), or which burning research question this finding is meant to address, I had a closer look at the paper. After all, Economics Letters is on the notoriously selective original Diamond list of the top 27 core journals in economics, and I’d like to believe that its editorial board makes infallibly wise decisions.

The study relates Eurobarometer survey data on life satisfaction across the EU-15 countries split into sub-groups by education, age, relative income and political orientation to a composite index of economic, political and social globalisation by country. Its remarkable main finding is that globalization significantly increases life satisfaction across all of these subgroups. More precisely, the analysis suggests that a one-point increase in the globalisation index (scaled from 0 to 100) raises the probability of being “very satisfied” with life by 0.5 to 1.5 percentage points.

In Spring 2001 only, Eurobarometer respondents were also asked “who do you trust the most to get the effects of globalisation under control?’’ with the possibility of picking several institutions including the World Trade Organisation (WTO), the International Monetary Fund (IMF) and the World Bank from a list, and a separate analysis of this single cross-section leads to the result cited above.

The author puts the underlying hypothesis as follows: “(R)elated to the Hudson (2006) finding of a positive effect of institutional trust on happiness, one could argue that individuals who express confidence in the institutions that promote globalization (i.e. the WTO, the World Bank, and the IMF) are more likely to experience an increase in well-being due to globalization”.

A meaningful or interesting hypothesis - or rather questionnaire results in desperate search of a research question?  What about the direction of causation – should it not be exactly the other way round to make sense?  Or am I missing the point?

Anyway, a quick glance at a summary of the raw data reveals what is driving the result. The countries with the highest proportions of respondents very satisfied with their life (Denmark (62%), Netherlands (48%), Sweden (41%)) are also the top scorers in terms of both trust in domestic and the said international institutions. Those with the fewest “very happy” respondents (Portugal (7%), Greece (9%)) also have the lowest institutional trust scores. Denmark and Sweden are the two “most globalised” EU-15 members according to the index used, while Portugal and Greece are among the three least globalised countries in 2000. There you go.

To get out of this without sounding like a Daily Mail hack debunking all happiness research as a waste of money, let me end with a link to exciting IDS work on wellbeing and development.