Sustainable economic policy and well-being: The relationship between adjusted net savings and subjective well-being

Mubashir Qasim and Arthur Grimes

No 290505, Motu Working Papers from Motu Economic and Public Policy Research

Abstract: We analyse the relationship between subjective wellbeing (SWB) and the World Bank’s measure of a country’s economic sustainability, adjusted net savings (ANS). We model SWB at individual level and at aggregated group level as a function of past ANS levels, after controlling for a country’s initial levels of SWB. The empirical models utilise World Values Surveys (WVS) data for self-reported life-satisfaction (our proxy for SWB). Our results show that ANS is negatively associated with future SWB outcomes over relatively short timespans (10-15 years) but this relationship is neutralised, or even reversed, for a longer timespan (20 years). The results demonstrate an important challenge in political economy. Governments that choose to save less in the short term may be able to spend more on the well-being of the current generation (i.e. current voters) but they diminish the reserves available to improve future generations’ well-being. At a more technical level, our results reinforce the concept that ANS is a useful sustainability indicator for infinite (or at least very long) time horizons, but it is not a good indicator of well-being developments over short time horizons.

Keywords: Consumer/Household Economics; Public Economics (search for similar items in EconPapers)
Pages: 69
Date: 2018-05
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Persistent link: https://EconPapers.repec.org/RePEc:ags:motuwp:290505

DOI: 10.22004/ag.econ.290505

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