MA Quantitative Economics students' blog : How Happy is Estonia ?

Author: Resuf Ahmed

INTRODUCTION

In a small Himalayan nation of Bhutan sandwiched between two giant and competing economies India and China, an idea was conceptualized of Gross National Happiness in which happiness is the fundamental human goal. The king of Bhutan Jigme Singye Wangchuck, said: "Gross National Happiness is more important than Gross National Product".[1]

Estonia a small country in Northern Europe, a well-developed country which is growing rapidly in the last few decades. From the lens of a foreigner, it can be seen that Estonian are reticent. Some say this is due to the gruesome history of Estonia which was pretty unstable which ultimately led to the development of this distinct character. While some say its due to harsh weather and people are relatively happy in summer than winter. So let's have a look whether there is any scientific explanation to that with the lens of Gross Happiness Index.

In 2011, UN General Assembly passed a resolution inviting member countries to measure the happiness of their people and then formulate the policies in order to maximize happiness.[2][3] The first “World Happiness Report” was published on April 1, 2012, the latest World Happiness Report is given in Figure 1

Figure 1. World Happiness Report 2017
Source: World Happiness Report 2017

METHODOLOGY OF CALCULATING HAPPINESS INDEX

World Happiness Report relies mainly on the survey conducted by Gallup World Poll[4](GWP).

The score of World Happiness is derived from these following 6 indicators[5]

GDP Per Capita
GDP per capita is in terms of Purchasing Power Parity (PPP) adjusted to constant 2011 international dollars, taken from the World Development Indicators (WDI) released by the World Bank in August 2016

Social Support
Social support (or having someone to count on in times of trouble) is the national average of the binary responses (either 0 or 1) to the GWP question “If you were in trouble, do you have relatives or friends you can count on to help you whenever you need them, or not?

Healthy Life Expectancy
Healthy Life Expectancy (HLE). The time series of healthy life expectancy at birth is calculated by the authors based on data from the World Health Organization (WHO), the World Development Indicators (WDI), and statistics published in journal articles.

Freedom to make Life Choices.
Freedom to make life choices is the national average of binary responses to the GWP question “Are you satisfied or dissatisfied with your freedom to choose what you do with your life?”

Generosity
Generosity is the residual of regressing national average of response to the GWP question “Have you donated money to a charity in the past month?” on GDP per capita.

Corruption or Trust
Perceptions of corruption are the average of binary answers to two GWP questions: “Is corruption widespread throughout the government or not?” and “Is corruption widespread within businesses or not?”

Each country is also compared to a hypothetical nation called Dystopia. Dystopia represents the lowest national averages for each key variable and is, along with the residual error, used as a regression benchmark.[6]

HAPPINESS INDEX OF ESTONIA

In 2017 World happiness Report Estonia is ranked 66^th, In the year 2016 Estonia was ranked 73^rd and the year 2015 Estonia was on 73^rd position worldwide. Let's look closely at the Estonia figures for 2016 and 2017.

	2016	2017	Change
Rank	73rd	66th	Increase
Overall	5.517	5.611	Increase
Explained by: GDP per capita	1.280	1.321	Increase
Explained by: social support	1.052	1.477	Increase
Explained by: healthy life expectancy	0.681	0.695	Increase
Explained by: freedom to make life choices	0.415	0.479	Increase
Explained by: generosity	0.084	0.099	Increase
Explained by: perceptions of corruption	0.185	0.183	Decrease
Dystopia (1.85) + residual	1.820	1.358	Decrease

TABLE 1, Source: World Happiness Report 2016 and World Happiness Report 2017.

As it could be seen from Table 1 that most of the data support an upward swing of the happiness Index for Estonia which translates that Estonia is becoming happier and happier. Perception of Corruption is almost same after 1 year but there is an increment of approximately 45% in the Social Security index which shows a very positive sign for the happiness among Estonians.

ANALYSIS OF ESTONIA’S HAPPINESS INDEX

If we just look at the position of Estonia in each and every 6 categories in 2017.

GDP per capita

Estonia Position - 39^th between Slovakia(1.325) and Lithuania(1.315),

Top Position - Qatar-1.871

Social Support

Estonia Position - 19^th between Sweden(1.478) and Lithuania(1.474),

Top Position - Iceland-1.611

Healthy Life Expectancy

Estonia Position - 50^th between Poland(0.699) and Argentina(0.695),

Top Position - Singapore-0.949

Freedom to make life choices

Estonia Position - 53^rd between Mozambique(.481) and South Africa(.479),

Top Position - Uzbekistan-0.658

Generosity

Estonia Position - 136^th between Botswana(0.099) and Angola(0.0998),

Top Position - Myanmar-0.838

Perception of Corruption or Trust

Estonia Position - 29^th between Mayanar(0.189) and Azerbaijan(0.181),

Top Position - Singapore-0.464

Ranking of Estonia on the basis of all these six indicators suggests that in five out of six Estonia is better than its Ranking on World Happiness Index. But the rank of 136^th in generosity reflects the reason for the position of 66^th despite doing so well in other indicators individually.

Indicators where Estonia is not matching its potential:

Freedom to make life choices

The question asked for this indicator was “Are you satisfied or dissatisfied with your freedom to choose what you do with your life?”

Freedom of Choice is one of the most vital prerequisites for a happy society. Estonia’s rank of 53^rd actually is quite an improvement from the previous survey. There is approximately 15% increase in Estonia score in just one year, Only 3 year of similar growth will make Estonia one of the top most country in this index.

This growth of Freedom is actually quite visible in Estonian especially in the field of Information Technology, Tallinn the Capital of Estonia is a popular startup destination in Estonia and it's commonly known as the startup capital of Europe.

Healthy Life Expectancy

Estonia is ranked 50^th in this Index, In the World Happiness Report 2017, WHO 2013 data is used[7].

But as we look at the report World Health Organisation published in 2016, Estonia is ranked[8] 40^th, which is a jump of 10 places which is quite a success in just 3 years.

But there is a very important observation that In the WHO report of 2016. If we just look at the Life Expectancy of just Female then Estonia is ranked at 30 with 82 years and for Male its ranked 65^th with 72.7 years, there is a whopping gap of almost 10 years between male and female Life Expectancy.[9]

But looking at the trend of Male and Female Life Expectancy in Figure 2 We can see that Male life expectancy is increasing.

Figure 2, Life Expectancy of Estonia
Source: https://www.stat.ee/34279

Generosity

The question asked in this indicator was “Have you donated money to a charity in the past month?”

In terms of Generosity Estonian are a reserved and it's completely visible in their rank of 136^th.

It can also be seen in the World Giving Index 2017 published by Charities Aid Foundation. Estonia is ranked 100^th overall in 2017[10] and 116^th overall in 2016[11]. So we can see a slight improvement there. But Estonia has a long way to go in this way. And I hope there will be further studies explain the reasons behind reservation of Estonians regarding charity. While in Myanmar 91% of the population donate money in Estonia it is just 22% of the population who donates money.[12] Christopher McCandless had written in his diary that “Happiness only real when shared”.[13]

CONCLUSION

In conclusion, it can be said that Estonia is improving in almost all the indicators, and could easily manage to be among top 30 happiest countries in next 5 years given the current trends but to be one of the top Happiest countries Estonia has a room of improvement especially in the indicator of Generosity.