Measuring quality of life across countries: A multiple indicators and multiple causes approach

Life expectancy, literacy rates, per capita income, mortality and morbidity statistics have been widely employed in empirical analyses to construct various indices of quality of life (QOL). The reason why so many indices of well-being exist in the literature is partly explained by the fact that such indices are sensitive to domains of QOL that are included in the measurement and how they are aggregated to arrive at a composite index. In this paper we model the QOL across countries as an unobservable latent link variable between observable causes and observable effects, which reduces the problem of bias, inconsistency, and arbitrary weightings of explanatory factors. We estimate and compare the QOL indices for 43 countries for the year 1999, noting differences between countries and varying role of various determinants of the QOL.