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Economic growth and well-being beyond the Easterlin paradox

In: A Modern Guide to the Economics of Happiness

Author

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  • Francesco Sarracino
  • Kelsey J. O’Connor

Abstract

Recent studies suggest that economic growth and well-being can grow together in the long run in presence of generous social safety nets, increasing social capital and declining income inequality. We put these conditions to a test in an attempt to explain the absence of a relation between economic growth and well-being in Luxembourg. To this aim we apply an error correction model to a panel of 15 Western European countries, and we use the results to predict life satisfaction in Luxembourg between 1991 and 2015. We find that the flat trend of life satisfaction in Luxembourg is likely the result of four forces acting in opposite directions. This suggests that the available list of moderating conditions – although not exhaustive – is a promising starting point to design new policies to durably improve well-being.

Suggested Citation

  • Francesco Sarracino & Kelsey J. O’Connor, 2021. "Economic growth and well-being beyond the Easterlin paradox," Chapters, in: Luigino Bruni & Alessandra Smerilli & Dalila De Rosa (ed.), A Modern Guide to the Economics of Happiness, chapter 9, pages 162-188, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:18839_9
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    Keywords

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    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O21 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Planning Models; Planning Policy

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