Macroeconomic Determinants of the Happiness of the Poor: A Case Study of Pakistan

In: Towards Global Transformation: Proceedings of the Third International Conference on Gross National Happiness. Thimphu, The Centre for Bhutan Studies 2008, pp. 367-389 . ISBN 99936-14-42-4

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Abstract

There is not much research on welfare-economics from the perspective of human wellbeing (happiness). The main reason is that this is qualitative and subjective phenomena are not easily captured by measurement. In the present endeavour, the authors tried to capture it (happiness) from the opposite side of the poverty index. We employed the modified ARDL technique for long-run friendship between the happiness of the poor and some macroeconomic influencing factors; short-run dynamic behaviour is scrutinised through ECM. The findings about the happiness of the poor and its determinants show that the happiness of poor individuals is highly influenced by macroeconomics shocks prevailing in the economy. Economic growth or a rise in GDP per capita decreases the level of the happiness of the poor due to an upper-echelon phenomenon over a long span of time in Pakistan. Inflation influences the purchasing power of poor segments of population and definitely affects the happiness negatively for both the long-term and short-term. Enhancement in remittances seems to push happiness or welfare levels of the poor upward significantly. Increases in indirect taxes, especially sales taxes, are associated with low levels of happiness of poor individuals in a small developing economy like Pakistan. Trade-openness improves happiness rankings of poor segments of the population through direct and indirect channels. Finally, a low level of happiness is associated with low urbanisation over a short period of time.