Life During Growth

A remarkable diversity of indicators shows quality of life across nations to be positively associated with per capita income. At the same time, the changes in quality of life as income grows are surprisingly uneven. Either in levels or changes, moreover, the effect of exogenous shifts over time is surprisingly strong compared to growth effects. This paper reaches this conclusion with a panel dataset of 81 indicators covering up to 4 time periods (1960, 1970, 1980, and 1990). The indicators cover 7 subjects: (1) individual rights and democracy, (2) political instability and war, (3) education, (4) health, (5) transport and communications, (6) inequality across class and gender, and (7) “bads.” With a SUR estimator in levels, income per capita has an impact on the quality of life that is significant, positive, and more important than exogenous shifts for 32 out 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 10 out of 81 indicators. With a first-differences IV estimator, growth has a causal impact on the quality of life that is significant, positive, and more important than exogenous shifts for 6 out of 69 quality of life indicators. The conclusion speculates about such explanations for the pattern of results as: (1) the long and variable lags that may come between growth and changes in the quality of life, and (2) the possibility that global socioeconomic progress is more important than home country growth for many quality of life indicators. 1 I acknowledge assistance on data collection and organization from a fortuitous succession of two hardworking research assistants, Peter Niessen and Giuseppe Iarossi. An unpublished literature survey by Peter Niessen was helpful as well. I have benefitted from comments of participants at the Poverty-EnvironmentGrowth Workshop at the World Bank including discussants Andrew Steer and Tom Tietenburg and from participants in seminars at the World Bank, George Washington, Harvard, MIT, NYU, Syracuse, the University of Virginia, and the NBER small-group meeting on Growth. Comments from and/or discussions with two anonymous referees, Joshua Aizenman, Ken Chomitz, Richard Easterlin, Raquel Fernandez, Jan Gunning, Dean Jamison, Ross Levine, Norman Loayza, Aart Kraay, Paul Krugman, Martin Ravallion, Jakob Svennson, and Jaume Ventura were extremely helpful. I am most grateful of all to Lant Pritchett, who contributed several rounds of trenchant criticisms. None of these generous commentators should be held responsible for any errors. The views expressed here are those of the author and not of the World Bank or its member governments. The data and full text for this paper are available on the web page http://www.worldbank.org/html/prdmg/grthweb/growth_t.htm