December 24th: in which country would you like to be poor?
If you knew you were going to be in the bottom half of the income distribution and had to choose a country to live in, which one would be your preference? Given all the stuff I’ve written about the contentment of people in the Nordic countries (despite their terrible weather), you might be inclined to choose one of those. Why not Denmark, with all its lovely hygge? [Note: Obviously, this is all just a narrative device. At least 50% of someone’s satisfaction with their life is genetically determined. Another 30% is not easily explained from the statistical data we have. So we are, at best, talking about the remaining 20%, and even then, where you live is unlikely to be the biggest driver.]
The conditions — and life satisfaction — of the lower half of the income distribution in the Nordic countries are indeed very good, relatively speaking. However, somewhat surprisingly, they are not the countries in which the lower-income people report the highest life satisfaction, or where the difference between the lower- and higher-income people is the narrowest. Nordics do OK, but are not quite top of the list. [Note that I’m using the World Values Survey and European Values Study data here, which gives slightly different rankings on life satisfaction than the Gallup World Poll data.]
Today’s chart is a little complicated, so let’s go through it element-by-element. The X-axis shows a list of countries for which the relevant data is available. There are 2 panels, with different Y-axes. The top panel shows GDP per capita in 2020, in purchasing power parity adjusted current international dollars. The bottom panel shows two data points for each country: the average life satisfaction of people in the bottom 5 income deciles (circle) and top 5 income deciles (triangle). The countries are ordered so that those with the highest satisfaction in the bottom half of the income distribution are on the left.
Unsurprisingly, the triangle is above the circle in every country: having a higher relative income does tend to convey many benefits that contribute to life satisfaction. [There are, however, a couple of countries, including Spain, Mexico, and Brazil, where the values for the top and bottom halves of the income distribution are near-identical.]
So, where are lower-income people the most satisfied with their lives? A couple of Latin American countries do very well on this measure: Puerto Rico, Mexico, Columbia, Nicaragua and Equador are all in the top 15. So are a few Asian countries, like Kyrgyztan, Vietnam, Tajikistan and Pakistan. Quite a few of these are poor countries in terms of their average GDP per capita. [I’ve had a quick look to see if I could explain “why”, but the answer is “not really”, given that it’s Christmas Eve and I need to get on with cooking the Finnish dinner that we traditionally enjoy on the 24th. One candidate explanation, on a very quick look, is that people in these countries either are, or subjectively assess to be, healthier than the country’s average income would predict.]
Of course, the Nordics do make it into some of the top positions, too. Norway, Finland, Iceland and Denmark are all in the top 20, as are several other European countries, such as Swizerland, Austria, the Netherlands, and the UK. [You may wonder why I chose to look at the bottom vs. top half of the income distribution. The answer is sample sizes. I could have looked at the bottom decile vs. the top decile, but in the survey data available, there would have been only about 50–200 valid responses in either of those categories for each country. Even looking at the bottom 3 and top 3 deciles was in my view too dodgy. However, it did provide a very similar broad pattern to that described above, i.e. reasonably content poorer people in some Latin American, Central Asian, and Nordic countries.]
