Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 699: Formal Institutions and Subjective Well-Being: Revisiting the Cross-Country Evidence.

Christian Bjørnskov (), Axel Dreher () and Justina AV Fischer ()
Additional contact information
Christian Bjørnskov: Dept. of Economics, Aarhus School of Business, University of Aarhus, Postal: Department of Economics, Aarhus School of Business, University of Aarhus, Prismet, Silkeborgvej 2, DK-8000 Aarhus C, Denmark
Axel Dreher: ETH Zurich, KOF Swiss Economic Institute, Postal: ETH Zurich, KOF Swiss Economic Institute, Weinbergstrasse 35, CH-8092 Zurich, Switzerland, and CESifo, Germany
Justina AV Fischer: Dept. of Economics, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden

Abstract: 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. In this paper, we revisit the findings from recent cross-country studies on the institutions-happiness association. Our findings suggest that the conclusions reached by previous studies are fairly sensitive to the specific measure of ‘happiness’ used. In addition, the results indicate that the welfare effects of policies may differ across phases of a country’s economic development. This bears important policy implications which we discuss in the concluding section of the paper.

Keywords: Happiness; Well-Being; institutions; policy implications; democracy; rule of law; government efficiency

JEL-codes: H10; H40; I31

38 pages, April 2, 2008

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