DEVELOPMENT

2006). Thus, it can be asked, are they are welfare states
after all?
Comments: the first two principal components have
been used to compile indices from 16 different indicators
that characterise welfare states. Pre-financial crisis data
from 2000-2008, 22 countries.
Figure 3.1.8 shows a positive connection between
people’s subjective well-being (life-satisfaction) and social
spending; the coefficient of the corresponding correlations
is 0.53. However, this indicator lacks statistical significance,
thus life-satisfaction is more associated with the
equal division of wealth and income than previously
(Figure 3.1.1. and 3.1.3.). Estonia’s position in this respect
is similar to the majority of new EU Member States,
which are characterised by lower social expenditures as
well as lower level of satisfaction than that of old-Europe.
Thus, the generosity of the public welfare expenditures
is not the single criteria for assessment the role
and functions of the welfare state. Based thereon, we can
say that the significance of a welfare state in the development
of well-being is not dependent only on how generously
the state finances social protection. Firstly, the
so-called social contract or legitimate agreement upon
the ideal type of the social model or welfare regime has
to be established. Secondly, the universality of benefits
providing equal opportunities should be ultimate aim. It
is often said that (in addition to efficiency loss) redistribution
and a paternalistic state can crowd out incentives
for individual coping and make us helpless. Testing the
“crowding-out hypothesis” is problematic, thus, we ask
whether individual pro-social behaviour is affected by
the intensity of welfare state. We measure pro-social
behaviour based on the OECD index (2011) that averages
the countries’ responses to three questions asked
by Gallup World Poll (2010) – whether the respondent
has volunteered time, donated money to a charity and
helped a stranger in the last month. Figure 3.1.9 shows
how pro-social behaviour is related to the extent of the
welfare state, that is, with the average value of the social
protection index and the de-commodification index
depicted in Figure 3.1.7.
The crowding-out hypothesis – the belief that a high
degree of government intervention will crowd out voluntary
activity is not supported by any empirical evidence
or solid theoretical foundations (Van Oorshot and Arts
2005). We also indicate that in the comparison of at least
18 European states (see Figure 3.1.9), there is not direct
association between the dimension of the welfare state
and pro-social behaviour. The OECD report (OECD 2011)
states that the Nordic countries, which are at the top of
many social indicators in this publication, were unusually
ordinary performers in terms of pro-social behaviour,
while the Anglo-American ones (U.S., Ireland and Great
Britain) position much higher. The Mediterranean and
Eastern European countries typically had low levels of
pro-social behaviour that is also reflected in Figure 3.1.9.
We show that the outperforming countries are divided
into two groups: liberal and pro-social states plus abundant
welfare and pro-social states. Sadly Estonian is positioned
at the lower end of the case countries -- with very
limited welfare state and minimal pro-social behaviour.
Conclusively, few illustrative facts that contradict some
theoretical frameworks allow us to allude to the country
being at a crossroads. The welfare contributions by the
state are not so limited that it would make people cooperatively
search for alternatives; but, these are also not
enough to promote greater pro-social behaviour.
3.1.4
Conclusions
Our aim was to illustrate the associations between the
indicators of subjective well-being, aggregate concepts
of welfare, various economic indicators and parameters
related to welfare states. However, correlation and association
doesn’t imply causality. We find that the economic
indicators that characterise the development of a state
– GDP and growth, low unemployment and a low Gini
coefficient can be associated with people’s life-satisfaction.
The most influential of these is the Gini coefficient.
The latter indicates that subjective well-being is not just
efficiency and market (wealth) based concept, but rather
on more complex phenomenon, which also contain broad
questions about relative equality and equal opportunities.
The greatest challenge, related to well-being, is the question
of how to reduce the income gap, without significantly
inhibiting efficiency (growth).
We also argue, that well-being and life-satisfaction
indicators as aggregate indices are not replacements
for GDP and the Gini coefficient, as measures of social
progress. Primarily because happiness is relative. Therefore,
when analysing happiness, relying on microdata is
advisable and age, marital status, employment and other
individual-based indicators must be controlled. It is also
disputable whether all individuals perceive well-being
similarly – is this rather security, personal freedom, or
societal norms like equal opportunities. The standards for
happiness and satisfaction may differ by culture, making
international comparisons difficult.
There is no clear-cut answer to the question of
whether public social spending also results in well-being.
Since social expenditures are mostly endogenous (rich
states can spend more) it is difficult to avoid a vicious circle,
in which poverty results in low social expenditures,
which in turns lead to poverty. So far, political agendas
have relied on one main trigger – efficiency – which leads
to the economic growth. And it has been feared that the
welfare state may inhibit growth. Estonia’s real social
expenditures increased after the crisis, but the gap with
the Nordic countries is still increasing. The question of
whether to increase public social contributions, or rely on
private ones instead is still open for Estonia. We believe
that taking a position regarding the future is inevitable,
that this firstly means agreement on the Estonian welfare
state model. This could also help to break current
vicious circle. This is a social contract. If it is decided
that the Nordic model should be the goal, then increasing
the state’s role is unavoidable, and the corresponding
fiscal issues related to how to finance such a turn must
be faced. If the goal is the Anglo-American vision, then
the problem is not only incentivising private contributions
for future provision of social services but also creating
compensating schemes for disadvantaged families such as
pensioners or lower-SES.
112
Estonian Human Development Report 2012/2013