Institutional Quality as a Buffer Against Economic Instability: Examining the Determinants of National Well-Being Across Development Contexts

Abstract

What factors determine why citizens in some nations report greater life satisfaction than others? This investigation probes the intricate nexus between macroeconomic turbulence, joblessness, integrity in public administration, and civic freedoms as predictors of collective happiness. Leveraging longitudinal observations spanning 156 nations from 2008 through 2023, the analysis deploys panel regression frameworks complemented by generalized method of moments estimation to disentangle causal pathways. The empirical evidence demonstrates that economic uncertainty exerts a pronounced negative influence on reported well-being; crucially, however, this adverse relationship weakens considerably where governmental apparatus functions effectively. Beyond economic considerations, the findings illuminate that both anti-corruption initiatives and protections for open discourse independently elevate national happiness scores. A particularly striking pattern emerges from disaggregated analysis: economies in earlier developmental stages suffer more acutely from macroeconomic disturbances yet paradoxically stand to gain disproportionately from governance reforms. The interaction coefficient between volatility measures and institutional effectiveness indicators provides compelling support for the hypothesis that capable public institutions serve as shock absorbers during periods of economic stress. These discoveries advocate for integrated policy architectures that concurrently pursue fiscal stability and institutional fortification, with special attention directed toward safeguarding populations most exposed to economic vicissitudes through expanded social protection mechanisms.