Wellbeing and GDP

Plenty has been written on the inadequacy of GDP as a measure of welfare and numerous alternative measures have been constructed. Given the proliferation of alternatives, we might wish to know what additional informational content they have over and above GDP. Grimes et al presented a paper at this year’s NZAE conference that investigates the power of the measures in predicting migration flows over the past fifty years. Essentially it estimates the additional information about a country’s attractiveness for migration that the wellbeing measures contain, over and above any income (GNI) differences.

[There] is clear evidence that migration flows respond to relative material wellbeing of countries …[We] find also that the Life Satisfaction measure adds further information over and above material wellbeing. …Thus while clearly important for predicting an objective wellbeing outcome, an index of material wellbeing is an insufficient index for measuring aggregate wellbeing for potential migrants; some measure of broader life satisfaction (that is uncorrelated with material wellbeing factors) must also be included in the definition of aggregate wellbeing…

Looking at the coefficients in their tables it seems that the life satisfaction measure is about half as important in determining migration decisions as income differences. Other measures of wellbeing turn out not to significantly influence migration decisions, over and above incomes and life satisfaction differences. Impressively, Grimes et al are able to explain 50-60% of migration flows using just these two variables!

If you’re interested in non-GDP measures of wellbeing I recommend reading the whole paper: it’s short, packed with good stuff, and brings some much needed empirical evidence to the discussion of which factors matter for welfare.