Estonian Human Development Report

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Figure 6.2.7. Difference between the values of the subjective and objective indicators of well-being 0,8 0,6 0,4 0,2 0 -0,2 -0,4 -0,6 -0,8 -1 Russia Finland ESTONIA Poland Romania Denmark Slovakia Spain Belgium Switzerland Latvia Ireland Sweden The Netherlands Slovenia Austria Ukraine Norway United Kingdom France Hungary Bulgaria Germany Portugal The greatest overvaluation of subjective well-being with respect to objective indicators exists in Russia. At the same time in Ukraine, which has a similar historical and cultural background, the indicators are much closer. Another interesting pair of countries is Bulgaria and Romania, where the situation is overvalued in Romania by a similar amount as it is undervalued in Bulgaria. The greatest dissatisfaction is expressed in Germany and Portugal. And why are people relatively satisfied with their life in Slovakia, but not so much in Slovenia, although Slovenia lies among the countries with the highest level of well-being? Apparently, we cannot answer these questions based only on the indicators included in the analysis, but more complicated cultural and social factors must be taken into consideration. The fact that satisfaction is always based on expectations must be taken into account. It can be said that in the highly developed countries with lower levels of satisfaction, such as Germany, France and England, expectations are greater for historical or cultural reasons. However, if we generally examine how the composite indicator of the objective side of well-being (including the country’s wealth, health, education, institutional organization and lack of alienation) is related to people’s satisfaction and feeling of happiness, then this correlation appears only in the group of countries with a higher level of well-being (correlations coefficient 0.915), while in lessdeveloped countries, satisfaction tends to be related not to the achieved level of well-being, but rather to the speed of economic growth. Estonia’s relatively high subjective assessments of well-being compared to the actual situation are probably impacted by rapid economic development and a discernible improvement in the standard of living compared to the recent past. This is an interim situation. Compared to References 1. Berger-Schmitt, R., Noll, H. H. (2000) Conceptual Framework and Structure of a European System of Social Indicators – EuReporting Working Paper No. 9 2. European Social Survey [http://ess.nsd.uib.no/index. jsp?year=2007] 30.09.2008 the other transition countries, Estonia has achieved a relatively high level, which is to some extent comparable to the less-developed “old” European Union member states. However, in the case of Estonia, two points provoke interest: firstly, the comparison of the self-assessment of the society with the level of institutional development and its assessment; and secondly, how Estonia’s subjective level of well-being will be affected by the fact that we are moving from the league of Europe’s less-developed countries into the group of more-developed countries, where the general expectation level is more demanding and assessments are more affected by current objective institutional indicators than by comparisons with the past. Based on an assessment of wealth, we still lag behind the “old” EU member states, at least in the context of the statistical bases used in this chapter, as well as behind Slovenia and Hungary (the Czech Republic was not included in the sample of countries under examination); we barely outdistanced Slovakia, and are somewhat ahead of Poland, Latvia, Russia and the other countries of the former Soviet Union. However, by taking subjective satisfaction with the economic situation as the basis, we advance a few places in the ranking, overtaking Hungary and Portugal. Based on the human capital indicators, we outpace only Romania and Russia. The primary reason for the poor position is our short average life span. At the same time, our ranking based on the assessment of health and education is higher than that based on objective indicators. We are almost as satisfied with our health and education as the Germans. Estonia stands out for its high assessments of governmental organization, which are the best in the transition countries. Surprisingly high is the generalized confidence indicator, based on which we outpace Germany, France and England. As governmental organization is interpreted as an indicator of the objective preconditions for social capital at the macro level and confidence as the subjective indicator of social capital, one could draw the conclusion that Estonia has already exceeded the shortage of social capital inherent to transition countries and we are among the countries with a balanced and trustworthy organization of life that is characteristic of the Nordic countries. There are arguments both for believing this and for doubting it. Estonia’s ranking based on the assessments of general satisfaction and the feeling of happiness is approximately the same as that based on wealth. In other words, our much lower indicators for the quality of life – poor health and short life expectancy – have not affected our feeling of happiness or satisfaction to date. Or our belief in ourselves, our own prospects and institutional capacities has helped to eliminate the impact of these negative factors. The question is whether this optimism and positive attitude will survive the current period of economic recession. 3. Human Development Report 2007/2008 (2007) United Nations 4. Kaufmann, D., Kraay, A., Mastruzzi, M. (2007) Governance Matters VI: Aggregate and Individual Governance Indicators 1996–2006, World Bank Policy Research Working Paper 4280. | 130
6.3. Relationships between economic and social policy The three whales of economic policy We will start this subchapter by introducing some principles of economic policy, by describing the importance of the institutions that link and direct participants in the economy. We will continue with social policies, thereafter we will present a matrix of governance correlations, and end with some conclusions about Estonia. In this case, we are dealing with social policy in the broader sense, which includes the entire social sphere. In this approach, education and health care are added to social protection and security. Materials from the Commission on Growth and Development, which was formed under the auspices of the World Bank, have been used as background for the following text, which includes a rather broad attempt to encompass growth and development correlations and influence factors (The Growth Report, 2008). The first and most important starting point for economic policy is the fact that the economy is based on market mechanisms that are guided by price signals, decentralized decision-making, and the preferences of consumers directed from the demand side to the supply side. The functioning of markets is framed by the property rights, which guarantee companies and entrepreneurs asset rights that are sufficient for making investments to increase the assets and use them in the best way. This is the general starting point for the shaping of economic policy that needs to be supplemented and regulated. The general reasoning for the latter is that economic activity itself may not suffice for the creation of the information necessary for realizing property rights or for the functioning of the markets. Therefore, the need develops for economic and other policies. Another prerequisite is related to the fact that the economic activities of all countries are more or less internationally open. Besides everything else, this also means that most knowledge and skills, including technological ones, are usually learned from others rather than being the result of invention. The widespread transfer of knowledge and technology from other countries has occurred in all countries with rapid and longterm economic growth. Moreover, knowledge includes both abstract formulas and practical applications, such as skills necessary for traffic management or for the construction of multi-level intersections. Moreover, the social organization side is at least as important as technical solutions. The third general condition is macroeconomic stability, the internal aspect of which is related to price stability and the external aspect to the stabilization of exchange rates, currency convertibility, balance of payments and currency reserves. The most universal consideration of stabilization is related to the uncertainty and risk of the economic environment. High inflation rates, as well as disturbances in the cash and capital flows related to other countries reduce the reliability of market signals, which has a critical impact on long-term investment decisions. The stabilization aspect and its impact on economic activity are often expressed as a restriction on social costs. The requirements for a balanced budget, or for a limited deficit (e.g. the 3% of GDP limitation, which is a condition for acceding to the European Monetary Union), are often a significant restriction on social costs, especially in the case of costs financed from the budget. Rules and economic policy During the past few years, theories on economic growth have placed great importance on the impact of institutions directing the functioning of markets. In economics, Douglas North’s approach, according to which institutions comprise formal rules (laws and other regulations), informal rules, (standards and practices), and enforcement mechanisms for rules (e.g. courts in the case of laws, public condemnation and alienation in the case of the non-fulfilment of informal rules) is widely accepted. The immaturity of institutions, e.g. the improper observance of good business practices, is the mark of an immature society. The insufficient performance of institutions manifests a negative impact on economic growth. A weakness of regulations, practices and their enforcement mechanisms increases uncertainty, which is expressed, for instance, by insufficient protection for investments or intellectual property, uncertainty about the impartiality of economic policy decisions, and an assumption of corruption in order to gain access to the infrastructure, real estate, and state procurements of the given country. The ratio of the black market in the country’s economy and the ability of the country’s institutions to curb this black market are also important. However, institutions are not absolute or definite, but rather develop along with economic conditions. For instance, accounting precision improves as the credit market develops. Institutional development is related to human and social capital, their performance assumes an accumulation of knowledge, learning and adaptation to economic needs. The performance of institutions is directly impacted by social capital, the strength and operation of connections between people. Human capital and social capital and the policies impacting them To form the factors related to the social side and assess their impact on economic activities and well-being, we used the concepts of human and social capital. Human capital is defined as the education, health and skills of a country or some other body of humans. The definition of social capital includes formal and informal networks, general confidence, specific confidence in institutions and the impact of standards. These concepts expand a strictly economic treatment of capital, by highlighting the impact of social factors on 131 |
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Estonian Human Development Report
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Estonian Human Development Report T
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4.2. Ethnic differentiations in sat
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Preface This year, the Estonian Hum
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CHAPTER 1 Estonian Human Developmen
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Figure 1.1.3. Life expectancy in co
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Figure 1.2.2. Life expectancy at bi
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to reality. The greatest inaccuracy
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Figure 1.2.9. Internal migration ev
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12. Marksoo, A. 1992. “Dynamics o
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Table 1.3.1. PISA 2006 study result
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Table 1.3.2. Number of students in
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1.4. The gross domestic product and
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Figure 1.4.3. Estonian GDP (right a
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1.5. Changes in the Estonian Human
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2.2. Health of Estonian residents i
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Table 2.2.4. Differences in life ex
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Figure 2.4.1. Healthy life years of
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Figure 2.4.4. Various accidents, tr
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2.5. Lifestyle and behaviour as a s
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Figure 2.5.5. Smoking in Estonia in
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Figure 2.6.1. Overview of the compo
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Table 2.6.2. Use of specialized med
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dren. The majority of services are
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Figure 2.8.2. How much a health dis
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2.10. Policy recommendations aimed
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CHAPTER 3 Quality of life and life
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Table 3.2.1. Characteristics of liv
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Table 3.2.4. An assessment of the e
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Figure 3.2.4. Difference in the job
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Table 3.2.6. Agreement with stateme
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Figure 3.3.1. Satisfaction with lif
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Figure 3.3.4. Percentage of people
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Figure 3.4.1. Types of quality of l
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Figure 3.5.1. Percentage of teenage
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Figure 3.5.4. Percentage of respond
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Arieh A., Conti C., Kutsar D., Nicg
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Figure 3.6.2. Subjective quality of
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Pieper, A. Sixsmith, Care related q
Page 82 and 83: Figure 3.7.1. The placement of Euro
Page 84 and 85: Figure 4.2.1. Life satisfaction by
Page 86 and 87: Table 4.2.1. Factors forming genera
Page 88 and 89: Annexes Annex 4.2.1. Socio-demograp
Page 90 and 91: Figure 4.3.1. Changes in the assess
Page 92 and 93: Figure 4.3.4. Attitudes of the Esto
Page 94 and 95: olds considered themselves to be pa
Page 96 and 97: Table 4.4.3. Agreement of the Russi
Page 98 and 99: Table 4.5.2. The prospects of non-E
Page 100 and 101: Figure 4.5.4. Certainty of Estonian
Page 102 and 103: mote equal opportunities. At the (e
Page 104 and 105: CHAPTER 5 Quality of life in a cons
Page 106 and 107: Figure 5.2.1. GDP and AIC per capit
Page 108 and 109: Figure 5.2.3. Distribution of consu
Page 110 and 111: Figure 5.2.4. Indexes of environmen
Page 112 and 113: Table 5.3.1. Comparison of countrie
Page 114 and 115: Figure 5.3.3. Comparison of types o
Page 116 and 117: Table 5.3.5. Connections between po
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Page 120 and 121: Table 5.4.3. Young people’s asses
Page 122 and 123: Figure 5.4.6. Time spent on the con
Page 124 and 125: Table 5.4.6. The perception of prob
Page 126 and 127: 5.6. Summary To briefly summarize t
Page 128 and 129: Table 6.2.1. Objective and subjecti
Page 130 and 131: Figure 6.2.4. Relationship between
Page 134 and 135: Figure 6.3.1. GDP, government secto
Page 136 and 137: Figure 6.3.3. Employed 15-74-year-o
Page 138 and 139: Figure 6.3.8. Percentage of social
Page 140 and 141: References 1. Aaviksoo, A., G. Paat
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Page 148 and 149: Figure 6.4.6. Ratio of the particip
Page 150 and 151: 6.5. Cities as development engines
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Page 154 and 155: have been underfinanced or are not
Page 156 and 157: Table 7.1. Factors that favour and
Page 158 and 159: Table 7.2. Potential economic devel
Page 160 and 161: Authors Chapter 1 Ene-Margit Tiit,
Page 162 and 163: Margit Keller (PhD) is a Senior Res
Page 164 and 165: Special prizes Estonian Human Devel
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Page 172 and 173: Honorable mentions Estonian Human D
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Estonian Human Development Report

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