The World Bank’s Worldwide Governance Indicators project (WGI) defines governance, as follows:

Governance consists of the traditions and institutions by which authority in a country is exercised. This includes the process by which governments are selected, monitored and replaced; the capacity of the government to effectively formulate and implement sound policies; and the respect of citizens and the state for the institutions that govern economic and social interactions among them.

WGI uses six dimensions of governance to evaluate a country’s quality of governance. These are:

  • Voice and Accountability

  • Political Stability and Absence of Violence

  • Government Effectiveness

  • Regulatory Quality

  • Rule of Law

  • Control of Corruption

WGI has released reports on over 200 countries and territories since 1996, generating a treasure trove of data for researchers interested in the connection between quality of governance and the people’s well being - that is, their overall level of happiness and life satisfaction. Unsurprisingly, researchers have generally found that, yes, good governance is associated with higher levels of well-being. For example, evidence from a comparison of 46 countries found that cross-country differences in life satisfaction were “very strongly linked” to differences in the six WGI governance quality measures (Helliwell, 2003).

As we all know, however, correlation is not causation. For instance, some third factor may be responsible for both quality of governance and national level of well being - say, the global market for a country’s key export. Or causation is the other way around, e.g., maybe people with a high level of well being are less willing to put up with bad governance.

Of course there are ways to detect causal signals amidst the correlational noise. In the case of governance, one could control for confounding variables, such as economic growth or per capita income - factors already known to influence national levels of well being. Or one could look at whether changes in quality of governance are followed by changes in national well being. And one should have a very large dataset, which reduces the likelihood of chance findings.

The authors of “Empirical linkages between good governance and national well-being" ( Helliwell, Huang et al, 2018) did all these things. Distinguishing between service delivery quality of governance (WGI’s government effectiveness, regulatory quality, rule of law, and control of corruption), and democratic quality (voice and accountability, political stability and absence of violence), here is what they found:

• Annual subjective life evaluations from 157 countries during the period of 2005–2012 demonstrated strong empirical linkages between government quality and national happiness.

• Changes in governance quality within a policy-relevant time horizon led to significant changes in national happiness.

• Service delivery quality generally dominated democratic quality in supporting higher national happiness.

• Democratic quality showed a positive influence only among countries that have achieved sufficiently high quality of service delivery.

So what is it about good governance that leads to greater happiness and life satisfaction? For starters, good governance creates conditions conducive to economic growth and higher living standards, which enables increases in well being, especially in less developed countries. More directly, good governance enhances social trust, among citizens and between citizens and governments. As the authors of “Empirical linkages between good governance and national well-being" note, “lives are happier in communities where people feel that they can trust others, including police, neighbors, work colleagues and strangers.”

References:

Helliwell, J. F. (2003). "How's life? Combining individual and national variables to explain subjective well-being." Economic Modelling 20(2): 331-360. https://doi.org/10.1016/S0264-9993(02)00057-3

Helliwell, J. F., H. Huang, et al. (2018). "Empirical linkages between good governance and national well-being." Journal of Comparative Economics 46(4): 1332-1346. https://doi.org/10.1016/j.jce.2018.01.004