An empirical investigation of the relationship between generic capability of well-being, instrumental freedoms and economic growth

AGUENANE, NOUR EDDINE (2016). 'An empirical investigation of the relationship between generic capability of well-being, instrumental freedoms and economic growth' Paper presented at the annual conference of the HDCA, Tokyo 2016.

topics: Operationalizing the Capability Approach, Capability Measurement and Index, Quantitative Methods

abstract: There used to be consensus amongst economists on the positive impact of economic growth on the living standards of members of a society, that belief is less tenable today. In fact, a growing number of empirical studies have shown a marked decrease in the correlation between economic growth and human well-being. With the paradox of the coexistence of a relatively high level of economic growth and an alarming level of well-being in many parts of the world, it can be said that the utilitarian approach based on income can not capture all the diversity hidden behind the concept of well-being. This work intends to reexamine the question. Making use of Amartya Sen's capability approach, our goal is to propose a new concept of well-being and to analyze the relationship of this construct with economic growth expressed in terms of  Gross Domestic Product per capita. For Sen, indeed, the question of development is multidimensional. Economic growth represents the material aspect of the question. Nevertheless, many no less important factors remain outside of its scope. Clearly, living a long healthy life, participating in the life of the community, participating in public decision making, freedom of expression, access to education, having successful social relationships – to name but a few of the things that enrich human existence – are, indeed, constituents of development. Therefore, the “development as freedom” approach proposed by Sen reclassifies GDP growth and industrial progress, while admitting their instrumental role, as means not as ends in themselves. To achieve development, Sen's approach recommends expanding the scope of substantive freedoms (capabilities) offered to members of society. It starts, on the one hand, by eradicating the main barriers to basic freedoms (economic poverty, violations of civil and political rights, lack of public services and social protection) and, on the other hand, by promoting the interconnection of instrumental freedoms (political freedoms, economic facilities, etc.) that directly promote the basic capabilities of people. Born from such considerations, our research tries to explore the nature of the relationship between economic growth and the generic capability of well-being and the role that can be played by intrumental freedoms to improve this relationship. But the complexity of the task requires us to spread our study over two stages. The first stage raises the methodological challenge of operationalizing the capability of well-being. This work will allow us to calculate a composite index of well-being based on the capability approach. This human capability index is an enhancement of the HDI. Once the capability of well-being is measured, we shall explore, in the second stage, the impact of economic growth on the different levels of capability. The approach of partial least squares will be used to capture the moderating and mediating effect of instrumental freedoms on this relationship. The preliminary results of our study, applied to the countries of the Union for the Mediterranean (UfM), show two results. On the one hand, they show that the impact of economic growth on the generic capability of well-being is quite low, while the impact of instrumental freedoms on it is positively and significantly stronger. On the other hand, they show that instrumental freedoms constitute the generator mechanism or process by which economic growth in terms of GDP can improve the capability of the populations. This result is tillustrated through its significant mediating effect.

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