Christian Bjørnskov

The Happy Few: Cross-Country Evidence on Social Capital and Life Satisfaction

No abstract available.

Cross-Country Determinants of Life Satisfaction: Exploring Different Determinants Across Groups in Society

This paper explores a wide range of cross-country determinants of life satisfaction exploiting a database of 90,000 observations in 70 countries. We distinguish four groups of aggregate variables as potential determinants of satisfaction: political, economic, institutional, and human development and culture. We use ordered probit to investigate the importance of these variables on individual life satisfaction and test the robustness of our results with Extreme Bounds Analysis. The results show that only a small number of factors, such as openness, business climate, postcommunism, the number of chambers in parliament, Christian majority, and infant mortality, robustly influence life satisfaction across countries while the importance of many variables suggested in the previous literature is not confirmed. This remains largely true when the analysis splits national populations according to gender, income, and political orientation also.

Economic freedom and entrepreneurial activity: Some cross-country evidence

While much attention has been devoted to analyzing how the institutional framework and entrepreneurship impact growth, how economic policy and institutional design affect entrepreneurship appears to be much less analyzed. We try to explain cross-country differences in the level of entrepreneurship by differences in economic policy and institutional design. Specifically, we use the measures of economic freedom to ask which elements of economic policy making and the institutional framework that are responsible for the supply of entrepreneurship (our data on entrepreneurship are derived from the Global Entrepreneurship Monitor). The combination of these two datasets is unique in the literature. We find that the size of government is negatively correlated with entrepreneurial activity but that sound money is positively correlated with entrepreneurial activity. Other measures of economic freedom are not significantly correlated with entrepreneurship.

How Does Social Trust Affect Economic Growth

This article connects two strands of the literature on social trust by directly estimating the effects of trust on growth through a set of potential transmission mechanisms. It does so by modeling the process using a 3SLS estimator on a sample of 85 countries for which a full data set is available. The results indicate that trust affects schooling and the rule of law directly, thereby raising economic growth rates. The article closes with a short discussion of the relevance of the findings.

Historical Trust Levels Predict the Current Size of the Welfare State

Despite the fact that large welfare states are vulnerable to free-riding, the idea that universal welfare states lead to higher trust levels in the population has received some attention and support among political scientists recently. This paper argues that the opposite direction of causality is more plausible, i.e. that populations with higher trust levels are more prone to creating and successfully maintaining universal welfare states with high levels of taxation where publicly financed social insurance schemes. The hypothesis is tested using instrumental variable techniques to infer variations in trust levels that pre-date current welfare states, and then using the variation in historical trust levels to explain the current size and design of the welfare state, and finally comparing the explanatory power of trust to other potential explanatory factors such as left-right ideology and economic openness. To infer variation about historical trust levels, we use three instruments, all used previously in the trust literature: the grammatical rule allowing pronoun-drop, average temperature in the coldest month and a dummy for constitutional monarchies. Using cross-sectional data for 77 countries, we show that these instruments are valid and that countries with higher historical trust levels have significantly higher public expenditure as a share of GDP and also have more regulatory freedom. This finding is robust to controlling for several other potential explanations of welfare state size.

Inequality and Happiness: When Perceived Social Mobility and Economic Reality Do Not Match

In this paper, we revisit the association between happiness and inequality. We argue that the interaction between the perceived and the actual fairness of the income generation process affects this association. Building on a simple model of individual labor-market participation under uncertainty, we predict that higher levels of perceived fairness cause higher levels of utility, and lower preferred levels of income redistribution. In societies with a low level of actual social mobility, income inequality is perceived more negatively with increased perceived fairness, due to the need for unexpected policy changes as a response to many unsuccessful investments of overly optimistic individuals. This effect becomes smaller as actual social mobility increases. Using data on happiness and a broad set of fairness measures from the World Values Survey, we find strong support for the negative (positive) association between fairness perceptions and the demand for more equal incomes (subjective wellbeing). We also find strong empirical support for the disappointment effect in countries with low social mobility. Consistent with our theoretical model, the results for high-mobility countries turn out to be ambiguous.

On the relation between income inequality and happiness: Do fairness perceptions matter?

In this paper, we revisit the association between happiness and inequality. We argue that the perceived fairness of the income generation process affects this association. Building on a two-period model of individual life-time utility maximization, we predict that persons with higher perceived fairness will experience higher levels of life-time utility and are less in favor of income redistribution. In societies with a high level of actual social mobility, income inequality is perceived more positively with increased expected fairness. The opposite is expected for countries with low actual social mobility, due to an increasing relevance of a disappointment effect resulting from unsuccessful individual investments. Using the World Values Survey data and a broad set of fairness measures, we find strong support for the negative (positive) association between fairness perceptions and the demand for more equal incomes (subjective well-being). We also find strong empirical support for the disappointment effect in low social mobility countries. In contrast, the results for high-mobility countries turn out to be ambiguous.

Social Trust and the Growth of Schooling

The paper develops a simple model to exemplify how social trust might affect the growth of schooling through lowering transaction costs associated with employing educated individuals. In a sample of 52 countries, the paper thereafter provides empirical evidence that trust has led to faster growth of schooling in the period 1960-2000. The findings are robust to the inclusion of a set of control variables and being estimated using an instrumental variables approach.

Politics and Privatization in Central and Eastern Europe

This article examines how government ideology influenced privatization efforts in Central and Eastern Europe after the transition from socialism. We analyse a dataset of privatization indicators covering small- and large-scale industries in 19 transition countries over the period 1990-2007 and introduce a government ideology index. The results suggest that market-oriented governments promoted the privatization of small-scale industries more than that of large-scale ones. In the rapid transition process in the early 1990s, leftist governments stuck to public ownership more strongly than in the following period from the mid-1990s to 2007. The remarkable differences between leftist and right-wing governments concerning both the role of government in the economy and the basic elements of political order are in line with developments in OECD countries, and may also hold further implications for transition and democratizing countries outside Central and Eastern Europe.

Combating Corruption: On the Interplay between Institutional Quality and Social Trust

The aim of this paper is to explore under which conditions institutional quality leads to lower corruption. A model of a simple economy where firms both chose between bribing or not bribing bureaucrats to avoid costs and between entering the official or unofficial economy shows that the effects of increasing institutional quality may be ambiguous due to perverse effects of institutions in the unofficial economy. Employing a recent index of corruption based on objective data, the paper shows that formal institutions are more effective in combating corruption in countries with high levels of social trust. The paper concludes by discussing the welfare and political implications of the findings.