AN EVALUATION OF EFFECTIVE PROSPERITY MEASURE: A CASE OF WELLBEING INDEX

Abstract

Wellbeing as a reflection of prosperity has been considered the most desirable real outcome of all human efforts however usually measured through gross domestic output of the economy that has been losing its credibility over the time. The purpose of this paper is to evaluate wellbeing measured through economic, social and institutional aspects by considering the methodological context of Legatum Prosperity Index (LPI) augmented by assigning weights based on Maslow’s theory of human needs. In addition, Minsky financial instability hypothesis allowed evaluating the sustainability of economic behavior across the selected aspects. Considering the data related to economic quality, business, education, health, financial security and environment, a comparative analysis has been made to judge the level of prosperity engrossed by these dimensions. Annual data related to Pakistan from 1960 to 2016 has been examined for about hundred indicators reflecting these dimensions after reducing them into 22 exogenous and four endogenous variables through index-transformation by employing Two Stage Least Squares (TSLS) regression technique. The major findings reveal that wellbeing measured through index is more successful to represent the prosperity scenario in case of Pakistan, further it ascertains that social and institutional dimensions are vital complement for wellbeing in addition to economic dimension which cannot uniquely be relied upon for sustainable prosperity.