Analysis of Regional Well-being andDevelopment of Its Indicators
Masao TSURI
Specially Appointed Professor, Okayama University
Professor Emeritus, Okayama University
Professor, Musashi University
Introduction
During the Setouchi Triennale (Setouchi Kokusai Geijutsu-sai), many people visited the Setouchi
region in Japan and abroad. The economic effect of an event is measured using an input-output
analysis, and an event that attracts several overseas visitors has a large multiplier effect. The
local economy is revitalized when visitors stay overnight or purchase regional goods. Therefore,
organizing events with special characteristics can be one of the ways to revitalize a region.
However, this temporal economic activity has only a short-term effect.
However, there are certain events which are expected to have long-term effects. For example,
a marathon event in a region is not only a way for participants to run on the day of the event but
also a way for them to develop a running habit which has long-term positive effects on health.
The active participation of many residents can improve their overall health conditions. Similarly,
the Setouchi Triennale also increases the richness of residents’ cultural lives by accumulating
artwork in the area and increasing their interest in culture.
Long-term effects include health, culture, and social connections and are not limited toeconomic effects. They enrich people's lives and lead to the construction of prosperous local
communities in a broad sense. However, such effects are not always estimated by objective values
but are perceived by people through their subjective senses. Well-being refers to the level ofholistic life satisfaction. People consider various factors in their lives when they answer questions
about their life satisfaction level, therefore a comprehensive measurement of well-being isdifficult.
To measure well-being, it is essential to understand its constituent elements. When do people
feel that they are living satisfactorily? Uzawa (2000) states that a prosperous society is one inwhich all people make full use of their innate and acquired qualities and abilities, engage in workthat allows them to realize their dreams and aspirations to the fullest, and earn an income

commensurate with their private and public social contributions. It is a society in which people
can have happy and stable families and live a life of high cultural standards with different social
contacts as possible. (Hirofumi Uzawa, Social Common Capital, Iwanami Shinsho, 2000). This isconsistent with the concept of well-being analyzed in this study.
The key to measuring well-being is the concept of social capital, or common social capital. The
natural environment and other natural resources are essential to enrich people's lives; however,they are neither privately owned nor traded in the market. For people’s well-being, it is importantto understand goods and capital that are not traded in the market. In this study, we review theconcept of holistic well-being in Section 1 and discuss the concepts of common social capital andresource allocation.
In Section 2, we review our understanding of well-being by examining the concepts andindicators put forth by the Organisation for Economic Co-operation and Development (OECD).
Well-being is the subjective evaluation by each individual. When life satisfaction is assessed,
the responses differ across countries, regions, and people, as people have different criteria for
judging their lives. We captured the characteristics of well-being by comparing and observing
the indicators of the different groups.
In Section 3, we present an analysis of the factors that influence the well-being of Japanesepeople using Japan’s statistics. Well-being differs not only by region, but also by gender, and age.
As economic conditions are considered to be basic life satisfaction factors, it is necessary toconsider the impact of other factors on well-being under different economic conditions.
1. Well-being and Social Common Capital
Well-being is the level of satisfaction or happiness with life, which depends on economic wealth(income, assets, etc.) and health, social and natural environment (culture, safety, weather, politics,etc.), and interaction (family structure, relationships with people around, community interaction
and activities, etc.).
The main indicator of economic activity in a country or region is the Gross Domestic Product(GDP), and the standard of living is indicated by GDP per capita. GDP does not include activities
or situations that are not traded in an economic market; therefore, it may diverge from the actual
wealth of a country or region in terms of well-being. Regional and individual well-being areindicators of non-tradable activities.
There is a phenomenon in which the average level of well-being does not increase when

economic wealth (GDP per capita) rises above a certain level; this is known as the Easterlin
Paradox. (Easterlin (1974)). The average level of well-being at the country level is not necessarily
higher in rich countries than in poor ones. This also means that there are differences in the wellbeing levels among countries with similar economic levels.
Social capital is a key concept. In contrast to the usual capital, social capital includes theinfrastructure of life related to the intrinsic values of nature, culture, and social connections.
Most of them produced by social capital are not traded in the market; therefore, they are notincluded in the GDP. However, they are essential to daily life and have a significant impact on
an individual’s well-being.
As social capital is not traded in the market, the distribution of social capital services is not
optimal. A typical example is environmental problems. When a company produces with the aimof profit maximization, it considers demand and costs. However, the environmental damage
caused by production, especially to the well-being of the local population, is not considered in the
profit maximization problem.
Additionally, several factors, such as economics, health, nature, culture, and social connections,will have trade-off relationships. For example, in the overwork problem, firms increase theirproducts and workers tend to increase their income. If they are optimized, then there is no
problem, but sometimes this induces dissatisfactory combinations of working hours and wages
for workers. If work time becomes excessive, workers’ well-being may decline, even as income
increases.
Economic analysis is useful for examining such allocations and tradeoff issues. In this study,
we investigate social common capital, which Uzawa (2000) emphasizes, since the problem
concerns whether private ownership is involved.
Privately owned capital is private capital used for production and consumption by the owner.
In addition to tangible capital, such as factories, production machinery, and automobiles,
intangible capital also exists, such as skills and knowledge. Social capital, as opposed to private
capital, is social infrastructure that is not privately owned. Capital accumulates mainly throughinvestments by the government sector, such as roads, bridges, and harbors. Government
administrative systems, such as education, healthcare, public security, justice, and public
administration are called institutional capital. Social common capital is the sum of social,
institutional, and natural capital, such as the environment. Social capital includes private
ownership capital, as personal interaction is a private social connection.
In an analysis of production that incorporates common social capital, capital is divided into

private and social capital. The relationship between productivity (marginal productivity) andinvestment costs determines the optimal supply of private capital. Social capital is used by many
economic agents; therefore, the cost burden does not necessarily coincide with users. Therefore,
the accumulation of social capital requires measurement of a socially optimal quantity.
On the consumption side of social capital, we examined people's satisfaction with the services
that arise from capital. The marginal utility of services from social capital (e.g., parks and safety)
is called the marginal benefit. Optimal allocation cannot be achieved naturally, because
individuals do not bear the investment costs directly,. The valuation of services from social capitalalso differs depending on attributes such as age and gender. Younger and older people associatedifferent levels of importance on factors and have different views on life. Therefore, an optimal
provision by the government is necessary. Alternatively, for activities with negative impacts,
efforts should be made to reduce the burden on the environment using environmental taxes andother measures.
The accumulation of common social capital is costly. The costs are financed by taxes and not
all are borne by the beneficiaries. The issue of cost can also be viewed in terms of the scarcity ofresources. A choice can be made between using scarce land resources as a place for factory
construction or preserving the natural environment.
The wellbeing of an individual, country, or region can be measured using a combination of
objective and subjective indicators. However, when objective indicators such as production andconsumption increase, the underlying social common capital, such as the destruction of nature,
may not be maintained. Given these trade-offs, it is not ideal for social wealth to increase allindicators. The OECD Better Life Index covers 11 areas, including housing, health, and safety. It
does not compile a comprehensive index or a country specific ranking of these indicators.
2. Comparative Analysis: Subjective and Objective Indices
2.1 Different Indicators and Coverage in Surveys
In the analysis of well-being and the development of indicators, the aim of this study was how tocapture subjective indicators. Well-being, which measures life satisfaction, is a subjective
indicator and has different characteristics from objective indicators, such as income, working
hours, and years of education. These objective indicators can be measured as they arequantifiable. However, evaluations such as trust among people and their social networks are
subjective indicators that vary across people.

It is important to measure the overall well-being of a country or a region. Bhutan proposed
Gross National Happiness (GNH) as an alternative to Gross National Income (GNI). The World
Happiness Report in Helliwell, Layard and Sachs eds. (2012) was published by the United
Nations’ Sustainable Development Solutions Network, which examined country rankings. Other
reports include the Human Development Index by the United Nations and the Better Life Index
by the OECD.
These surveys measure individuals’ levels of life satisfaction using questionnaires. However,different surveys use different methods, questions, or numbers of steps for evaluation. This
makes it difficult to conduct inter-regional or time-series analyses. Suzuki and Tanabe (2016)provide a detailed discussion of the differences in results due to the choice of statistics andindicators in their survey, pointing out that there is a large variation in subjective well-being
among prefectures across surveys. Additionally, Krueger and Schkade (2008) pointed out thatanswers to subjective questionnaires are likely to depend on feelings at the time of the survey
response.
The OECD provides guidelines for creating a well-being index, for instance, OECD Guidelines
on Measuring Subjective Well-Being (OECD, 2013). The OECD Guidelines classify questions on
subjective well-being into three types depending on the scope, such as the point in time and thesubject: life evaluation, which is an evaluation of an individual's life; affect, which is the degreeof emotional satisfaction at a certain point in time; and subjectivity, which is the degree ofsatisfaction at a certain point in time. The third is eudaimonia, or Aristotelism, which asks about
the psychological meaning and purpose of life. An example of eudaimonia is the feeling of
positivity, optimism, calmness, or loneliness.
The well-being survey by the OECD is summarized in “How's Life? Measuring Well-Being” andvarious indicators can be found on the OECD website as the OECD Better Life Index (http://www.
oecdbetterlifeindex.org/). The OECD also reports on the well-being of regional areas(https://www.oecdregionalwellbeing.org).
The left panel of Figure 1 shows the results of surveys conducted in 44 OECD countries from2010 to 2018. The figure shows disposable income (USD in 2015 PPPs per capita) on the verticalaxis, and life satisfaction (0–10) on the horizontal axis. The sample periods of the statistics are2013 and 2018, although some countries (Austria, Mexico, and New Zealand) reported those for2014. The sample size was 60 and the mean life satisfaction score was 7.25. This figure indicatesa relatively strong correlation between income and life satisfaction at the national level.
However, when we look at the values of regional well-being, the results differ at the country

level. Figure 1 shows disposable income per capita (USD at 2010 PPPs per capita) on the verticalaxis and self-evaluation of life satisfaction on the horizontal axis. Statistics were obtained fromthe 2014 survey and covered 392 of the 430 regions. The mean life satisfaction score was 6.66.
Unlike the figure at the country level, there is an asymmetry in the distribution at the regional
level. There were no data for the upper-left region. Almost no regions had high income levels andlow life satisfaction. However, there are several points in the lower-right region. There areregions where the average satisfaction level is high, even among low-income individuals. Suchasymmetry cannot be found in country-level averages, but becomes visible when we deal withdetailed regional data.
Figure 1 Comparison of country and regional surveys

Source: OECD Well-being Statistics
Note: The left figure at the country level shows the USD for 2015 PPPs per capita, while the right figure
shows the USD for 2010 PPPs per capita. The horizontal axis indicates the level of life satisfaction
on a scale from 0 to 10 (11 levels).

2.2 Characteristics of Subjective Indicators
In this section, we examine the relationship between the subjective indicators. Figure 1 shows
the relationship between the objective income indicator and the subjective life satisfaction
indicator. Figure 2 (left-side) illustrates the relationship between life satisfaction and satisfaction
with personal relationships.
When the points in the figure are divided into high-income and low-income categories, the blue
high-income countries tend to be in the upper-right region and the red low-income countries tend
to be in the lower left. Here, high income is defined as above average, and low income is defined
as below average. This figure shows that a higher income may lead to higher subjective indicators.
The right panel of Figure 2 shows the percentage of people who felt safe at night (%). This is a

subjective evaluation. As shown in the left figure, the values for high-income countries are in theupper-right region.
Figure 2 Relationships between subjective indicators: Country level

Source: OECD Well-being Statistics
Note: The vertical axis of the left figure shows the level of satisfaction with personal relationships (0–10
on an 11-point scale), and the vertical axis of the right figure shows the percentage (%) of people who
felt safe walking at night.

Further, we assess the situation at the regional level using OECD regional well-being statistics.
The left panel of Figure 3 shows the relationship between the percentage of people who had
someone they could consult when they had a problem (%), and their life satisfaction levels. Here,the points are divided into four quadrants and color-coded based on the level of disposable income
per capita: Qu1H is the highest-income region, Qu4L is the lowest-income region, and Q2 and Q3
are middle-income regions.
In the left panel of Figure 3, the points for the high-income regions are plotted in the upper
right region. However, the points in low-income areas were scattered. As shown in Figure 1, there
were areas with high life satisfaction, including those with low social network support. Thisasymmetry also exists in other indicators. As expected, a high income level affects life satisfaction,
but it also suggests that there are factors that increase well-being regardless of the income level.
Regional well-being statistics include an index of the natural environment measured by PM2.5.
A similar scatterplot is shown on the right side. Interestingly, the natural environment wascorrelated with life satisfaction, even in low-income areas of Qu4L. The natural environment isrelated to life satisfaction without being affected by the income level.
We examine the characteristics of the subjective indicators by comparing OECD country datawith regional data. It is suggested that subjective indicators are affected by economic conditions
such as income. However, some indicators, such as the natural environment, affect people's wellbeing independent of income level.
Figure 3 Relationships between subjective indicators: Regional level

Source: OECD Well-being Statistics
Note: The vertical axis of the left figure shows the percentage (%) of people who answered yes to thequestion of whether they have someone they can consult (perceived social network support), and thevertical axis of the right figure shows the PM2.5, level (micrograms (㎍) per cubic meter) in the region.

3. Data Analysis: Religion, Age and Economy
In this section, we explain Tsuri’s (2022) main results. Although overall well-being is influenced
by economic conditions, it also depends on social capital such as social connections, culture, andthe natural environment. Therefore, we analyzed the extent to which these factors affect wellbeing. Specifically, we clarified the relationship between objective indicators of consumption andincome, and subjective indicators of life satisfaction.
The main results of the analysis are as follows. The relationship between well-being andprefectural characteristics is examined to develop an index of regional well-being. However, theresults show that regional differences are not caused by regional characteristics, but by age
structure. Overall, in Japan, differences in age structure and income levels lead to differences inlife satisfaction by prefecture. Nevertheless, differences in environmental factors, such as
weather, may impact well-being.
Significant differences were found in the factors influencing well-being. Social factors (social
connections or support) positively influenced well-being in all generations, but the strength oftheir influence differed by generation and gender. For those aged 60 years and above, well-being

increased with work time (i.e., less work). The economic situation is also important for older
generations, but due to budget constraints, income level influences well-being more thanconsumption.
We analyzed the relationships between a survey of subjective indicators and objective economic
statistics. Subjective indicators such as life satisfaction were obtained from the 2019 and 2020
surveys of the Well-Being Survey and Quality of Life (WSQL) by the Cabinet Office, Japan, a largescale survey in Japan. Individual data (approximately 15,000) from this survey were combinedwith other economic statistics by prefecture (47 prefectures) and age group (14 classes).
Figure 4 shows the relationship between life satisfaction (Q1) and job satisfaction (Q16.1). The
question is asked on an 11-point scale, with 0 being "not at all satisfied" and 10 being "verysatisfied.
Interestingly, the asymmetry in Figure 4 is found, as in the OECD Regional well-being. Whenjob satisfaction was high, Q1 was less likely to be low. However, Q1 may be high even when job
satisfaction is low. A subjective measure of job satisfaction can complement the objective measureof income levels. That is, a high income can be satisfied with a low satisfaction, but not vice versa.
Figure 4 Relationships between job satisfaction and life satisfaction: Individual data

Source: The Cabinet Office, Japan, Well-being Survey and Quality of Life, 2019 and 2020
Note: Q16.1 asks, "How satisfied do you feel about your job?" The original answer is 0–10. Q1 asked,"Overall, how satisfied are you with your current life?” Q1 was answered on a scale of 1 to 11.

Statistics on income and consumption were obtained from the 2019 National Survey of Family
Income and Expenditure (NSFIE) 2019 by the Ministry of Internal Affairs and Communications.
The NSFIE is a large-scale survey for which individual data are available. Since householdstatistics are for households, it is necessary to estimate and obtain the intra-household
allocations of individuals to family members. We estimate the values for each age groupindependently from publicly available prefectural statistics.
We adopted the relative income hypothesis by Clark, Frijters and Shields (2008). Oshio and
Urakawa (2012) examined the relative hypothesis in Japan and obtained results consistent with
it. In this study, the consumption expenditure/disposable income ratio was used as the main
explanatory variable. The utility-maximization problem in economics concerns the utility
obtained from consumption, where income is a budget constraint.
The results of the analysis are presented at the beginning of this section (see Tsuri (2022) for
detailed analysis). Table 1 summarizes the various indicators that affect well-being, based on theanalysis results. In addition to age and region, social capital and common social capital areclassified in this table. Additionally, there are several y overlapping items between social common
capital and social capital, as well as between social capital and private capital. Therefore, theclassification in this table is conceptual.
The elements classified as private capital in Table 1 correspond to consumption and investment
issues, which are the subjects of analysis. Subjective life satisfaction is not the same, even at thesame income level, because different countries have different economic systems (e.g., capitalism),labor systems, and practices. In addition, these factors differ depending on the age and working
conditions.
Table 1 Factors in well-being analysis
Time or AgePrivateFactors

Old or Young

EconomyConsumption

Present or Woking Future or Retired

Income (Capital, Labor)

CapitalExogenous factors
Capitalism

Withdrawal of Labor Systems

Capital, Savings, Investment

savings

and Practices

SocialHuman capital

Education,

Education SystemcommonHealth, and Insurance

Health insurance, Pension insurance

Insurance system

capitalSocial system

Children's benefit, Education, Job training

Politics and Administration

SocialEnvironment

Natural Environment, Living Environment

Region, Climate

capitalCultureSports, Music, Arts, Social connections

4. Concluding Remarks
Although social common capital and social capital are almost synonymous, it is appropriate todistinguish them from private capital. Public sector institutional factors (institutional capital),such as social security, education, and political systems, affect people's lives. Local cultural
capital and the natural environment, which are not privately owned, are also important factors
influencing regional well-being.
The level of regional well-being is based on economic conditions such as income andconsumption, but also depends on other social common capital or social capital. Among these,nature, social connections, and cultural and social environments directly affect well-being,
regardless of economic factors, as they are related to the living environment. The subjective life
satisfaction responses differed according to age. There were differences in the social
environments of each generation.
The economic impacts differ between those who benefit from them and those who do not. Somepeople did not appreciate visitors from other regions. However, the Setouchi Triennale, forexample, can contribute to the accumulation of social capital not only during the festival but also
in the long term. Not only does it contribute to the building of diverse cultural capital in theregion but also promotes people's interactions and connections in the community. Social capitalalso contributes to well-being. This leads to the maintenance of the natural environment. The
analysis in this study indicates that regional well-being can be improved by the long-term
accumulation of social capital.
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