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Will GDP Growth Increase Happiness in Developing Countries?

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  • Clark, Andrew E.

    ()
    (Paris School of Economics)

  • Senik, Claudia

    ()
    (Paris School of Economics)

Abstract

This paper asks what low-income countries can expect from growth in terms of happiness. It interprets the set of available international evidence pertaining to the relationship between income growth and subjective well-being. Consistent with the Easterlin paradox, higher income is always associated with higher happiness scores, except in one case: whether growth in national income yields higher well-being is still hotly debated. The key question is whether the correlation coefficient is "too small to matter". The explanations for the small correlation between national income growth and subjective well-being over time appeal to the nature of growth itself (from negative side-effects, such as pollution), and to the psychological importance of relative concerns and adaptation. The available evidence contains two important lessons: income comparisons do seem to affect subjective well-being, even in very poor countries; however, adaptation may be more of a rich-country phenomenon. Our stand is that the idea that growth will increase happiness in low-income countries cannot be rejected on the basis of the available evidence. First, cross-country time-series analyses are based on aggregate measures, which are less reliable than those at the individual level. Second, development is a qualitative process involving take-off points and thresholds. Such regime changes are visible to the eye through the lens of subjective satisfaction measures. The case of Transition countries is particularly impressive in this respect: average life satisfaction scores closely mirrored changes in GDP for about the first ten years of the transition process, until the regime became more stable. The greater availability of subjective measures of well-being in low-income countries would greatly help in the measurement and monitoring of the different stages and dimensions of the development process.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5595.

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Length: 76 pages
Date of creation: Mar 2011
Date of revision:
Publication status: published in: Robert Peccoud (ed.), Measure For Measure: How Well Do We Measure Development?, Paris: STIN, 2011, 99-176
Handle: RePEc:iza:izadps:dp5595

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Keywords: income; subjective well-being; comparisons; development; adaptation;

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References

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  1. Rafael Di Tella & Robert MacCulloch, 2005. "Gross National Happiness as an Answer to the Easterlin Paradox?," Macroeconomics, EconWPA 0504027, EconWPA.
  2. David G. Blanchflower & Andrew J. Oswald, 2005. "Happiness and the Human Development Index: The Paradox of Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 38(3), pages 307-318, 09.
  3. Vinod Mishra & Ingrid Nielsen & Russell Smyth, 2010. "Relative Income, Temporary Life Shocks and Subjective Wellbeing in the Long-run," Development Research Unit Working Paper Series, Monash University, Department of Economics 51-10, Monash University, Department of Economics.
  4. Easterlin, Richard A., 2009. "Lost in transition: Life satisfaction on the road to capitalism," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 71(2), pages 130-145, August.
  5. Rafael Di Tella & Robert J. MacCulloch & Andrew J. Oswald, 2003. "The Macroeconomics of Happiness," The Review of Economics and Statistics, MIT Press, MIT Press, vol. 85(4), pages 809-827, November.
  6. Ada Ferrer-i-Carbonell & Paul Frijters, 2004. "How Important is Methodology for the estimates of the determinants of Happiness?," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 114(497), pages 641-659, 07.
  7. Akay, Alpaslan & Martinsson, Peter, 2008. "Does Relative Income Matter for the Very Poor? Evidence from Rural Ethiopia," IZA Discussion Papers, Institute for the Study of Labor (IZA) 3812, Institute for the Study of Labor (IZA).
  8. DiTella, Rafael & MacCulloch, Robert & Oswald, Andrew J., 2001. "Preferences over inflation and unemployment: Evidence from surveys of happiness," ZEI Working Papers, ZEI - Center for European Integration Studies, University of Bonn B 03-2001, ZEI - Center for European Integration Studies, University of Bonn.
  9. Bernard M.S. van Praag & Paul Frijters, 1999. "The measurement of welfare and well-being; the Leyden approach," School of Economics and Finance Discussion Papers and Working Papers Series, School of Economics and Finance, Queensland University of Technology 071a, School of Economics and Finance, Queensland University of Technology.
  10. Olof Johansson-Stenman & Fredrik Carlsson & Dinky Daruvala, 2002. "Measuring Future Grandparents" Preferences for Equality and Relative Standing," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 112(479), pages 362-383, April.
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Citations

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Cited by:
  1. Senik, Claudia, 2011. "The French Unhappiness Puzzle: The Cultural Dimension of Happiness," IZA Discussion Papers, Institute for the Study of Labor (IZA) 6175, Institute for the Study of Labor (IZA).
  2. Beja Jr., Edsel, 2013. "Does economic prosperity bring about a happier society? Empirical remarks on the Easterlin Paradox debate sans Happiness Adaptation," MPRA Paper, University Library of Munich, Germany 50633, University Library of Munich, Germany.
  3. Andrew E. Clark, 2008. "Happiness, habits and high rank: Comparisons in economic and social life," PSE Working Papers, HAL halshs-00586049, HAL.
  4. Andrew E. Clark & Sarah Flèche & Claudia Senik, 2012. "The Great Happiness Moderation," PSE Working Papers, HAL halshs-00707290, HAL.
  5. Clark, Andrew E. & D'Ambrosio, Conchita, 2014. "Attitudes to Income Inequality: Experimental and Survey Evidence," IZA Discussion Papers, Institute for the Study of Labor (IZA) 8136, Institute for the Study of Labor (IZA).
  6. repec:hal:wpaper:halshs-00707290 is not listed on IDEAS
  7. Paolo Falco & William F. Maloney & Bob Rijkers & Mauricio Sarrias, 2010. "Heterogeneity in Subjective Wellbeing: An Application to Occupational Allocation in Africa," DOCUMENTOS CEDE, UNIVERSIDAD DE LOS ANDES-CEDE 010494, UNIVERSIDAD DE LOS ANDES-CEDE.
  8. Nadir Preziosi, 2013. "Life is Getting Worse in ESS Data: Is This Due to Micro or Macro Factors?," Bruges European Economic Research Papers, European Economic Studies Department, College of Europe 28, European Economic Studies Department, College of Europe.
  9. Xavier Fontaine, 2011. "Envy and Hope," Working Papers, HAL hal-00616993, HAL.
  10. Xavier Fontaine & Katsunori Yamada, 2012. "Economic Comparison and Group Identity: Lessons from India," PSE Working Papers, HAL hal-00711212, HAL.
  11. repec:hal:wpaper:hal-00711212 is not listed on IDEAS
  12. Beja Jr., Edsel, 2013. "Does economic prosperity bring about a happier society? Empirical remarks on the Easterlin Paradox debate," MPRA Paper, University Library of Munich, Germany 49446, University Library of Munich, Germany.

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