Life During Growth: International Evidence on Quality of Life and Per Capita Income

41 Pages Posted: 20 Apr 2016

See all articles by William Easterly

William Easterly

New York University - Department of Economics

Date Written: March 1999

Abstract

Changes in a home country's quality-of-life indicators possibly depend as much on changes in world income as on changes in home country growth. The evidence that life gets better during growth is surprisingly uneven. The cross-country relationship between income and diverse indicators of the quality of life remains strong. Remarkably diverse indicators show quality of life across nations to be positively associated with per capita income. But changes in quality of life as income grows are surprisingly uneven. Moreover, in either level or changes, the effect of exogenous shifts over time is surprisingly strong. It is possible that changes in a home country's quality-of-life indicators depend as much on changes in world income as on changes in home country growth. The improvement in life expectancy everywhere, for example, may have reflected technical breakthroughs in antibiotics associated with world economic growth. The strong results on exogenous time shifts point in this direction. Easterly reaches this conclusion using a panel data set of 81 indicators covering up to four periods (1960, 1970, 1980, and 1990). The indicators cover seven subjects: health, education, individual rights and democracy, political instability and war, transport and communications, inequality across class and gender, and bads. With a seemingly unrelated regressions (SUR) estimator in levels, per capita income has an impact on the quality of life that is significant, positive, and more important than exogenous shifts for 32 of 81 indicators. With a fixed effects estimator, growth has an impact on the quality of life that is significant, positive, and more important than exogenous shifts for 6 of 69 quality-of-life indicators. The evidence that life gets better during growth is surprisingly uneven. The cross-country relationship between income and diverse indicators of the quality of life remains strong. Easterly speculates about explanations for the pattern of results, such as the long and variable lags that may come between growth and changes in the quality of life, and the possibility that global socioeconomic progress is more important than home country growth for many quality-of-life indicators. This paper - a product of Macroeconomics and Growth, Development Research Group - is part of a larger effort in the group to study the political economy determinants of policymaking. The author may be contacted at weasterly@worldbank.org.

Suggested Citation

Easterly, William, Life During Growth: International Evidence on Quality of Life and Per Capita Income (March 1999). World Bank Policy Research Working Paper No. 2110. Available at SSRN: https://ssrn.com/abstract=597269

William Easterly (Contact Author)

New York University - Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States

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