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Will GDP growth increase happiness in developing countries?

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  • Andrew E. Clark

    (PSE - Paris School of Economics, PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, IZA - Institute for the Study of Labor - IZA)

  • Claudia Senik

    (PSE - Paris School of Economics, PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, UP4 - Université Paris-Sorbonne)

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. Conforming to the Easterlin paradox, higher income always correlates with higher happiness, except in one case: whether national income growth yields higher well-being is still hotly debated; essentially, the question is whether the correlation coefficient is "too small to matter". The explanations for the small correlation between income growth and subjective well-being over time appeal to the nature of growth itself (e.g. 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 individual ones. Second, development is a qualitative process that involves take-offs and thresholds. Such regime changes are eye-visible through the lens of subjective satisfaction measures. The case of Transition countries is particularly impressive in this respect: average life satisfaction scores closely mirror changes in GDP for about the first ten years of the transition process, until the regime becomes more stable. If subjective measures of well-being were made available in low-income countries, they would certainly help measuring and monitoring the different stages and dimensions of the development process.

Suggested Citation

  • Andrew E. Clark & Claudia Senik, 2010. "Will GDP growth increase happiness in developing countries?," PSE Working Papers halshs-00564985, HAL.
  • Handle: RePEc:hal:psewpa:halshs-00564985
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00564985v2
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    References listed on IDEAS

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    1. Rafael Di Tella & Robert J. MacCulloch & Andrew J. Oswald, 2003. "The Macroeconomics of Happiness," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 809-827, November.
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    1. repec:zag:zirebs:v:20:y:2017:i:2:p:21-32 is not listed on IDEAS
    2. Senik, Claudia, 2011. "The French Unhappiness Puzzle: The Cultural Dimension of Happiness," IZA Discussion Papers 6175, Institute for the Study of Labor (IZA).
    3. Asadullah, M. Niaz & Xiao, Saizi & Yeoh, Emile, 2018. "Subjective well-being in China, 2005–2010: The role of relative income, gender, and location," China Economic Review, Elsevier, vol. 48(C), pages 83-101.
    4. Aronsson, Thomas & Johansson-Stenman, Olof, 2014. "Genuine Saving and Conspicuous Consumption," Umeå Economic Studies 900, Umeå University, Department of Economics.
    5. Clark, Andrew E. & D'Ambrosio, Conchita, 2014. "Attitudes to Income Inequality: Experimental and Survey Evidence," IZA Discussion Papers 8136, Institute for the Study of Labor (IZA).
    6. Djankov, Simeon & Nikolova, Elena & Zilinsky, Jan, 2016. "The happiness gap in Eastern Europe," Journal of Comparative Economics, Elsevier, vol. 44(1), pages 108-124.
    7. Andrew E. Clark & Sarah Flèche & Claudia Senik, 2012. "The Great Happiness Moderation," PSE Working Papers halshs-00707290, HAL.
    8. Clark, Andrew E. & D'Ambrosio, Conchita, 2014. "Attitudes to Income Inequality: Experimental and Survey Evidence," IZA Discussion Papers 8136, Institute for the Study of Labor (IZA).
    9. Byela Tibesigwa & Martine Visser & Brennan Hodkinson, 2016. "Effects of Objective and Subjective Income Comparisons on Subjective Wellbeing," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 128(1), pages 361-389, August.
    10. Fontaine, Xavier & Yamada, Katsunori, 2014. "Caste Comparisons in India: Evidence From Subjective Well-Being Data," World Development, Elsevier, vol. 64(C), pages 407-419.
    11. Andrew E. Clark, 2008. "Happiness, habits and high rank: Comparisons in economic and social life," PSE Working Papers halshs-00586049, HAL.
    12. Beja Jr., Edsel, 2013. "Does economic prosperity bring about a happier society? Empirical remarks on the Easterlin Paradox debate," MPRA Paper 49446, University Library of Munich, Germany.
    13. Falco, Paolo & Maloney, William F. & Rijkers, Bob & Sarrias, Mauricio, 2015. "Heterogeneity in subjective wellbeing: An application to occupational allocation in Africa," Journal of Economic Behavior & Organization, Elsevier, vol. 111(C), pages 137-153.
    14. Aronsson, Thomas & Johansson-Stenman, Olof, 2015. "Keeping up with the Joneses, the Smiths and the Tanakas: On international tax coordination and social comparisons," Journal of Public Economics, Elsevier, vol. 131(C), pages 71-86.
    15. Andrew E. Clark & Sarah Flèche & Claudia Senik, 2012. "The Great Happiness Moderation," SOEPpapers on Multidisciplinary Panel Data Research 468, DIW Berlin, The German Socio-Economic Panel (SOEP).
    16. Xavier Fontaine & Katsunori Yamada, 2012. "Economic Comparison and Group Identity: Lessons from India," PSE Working Papers hal-00711212, HAL.
    17. Bruno Martorano & Luisa Natali & Chris De Neubourg & Jonathan Bradshaw, 2013. "Children’s Subjective Well-being in Rich Countries," Papers inwopa686, Innocenti Working Papers.
    18. Xavier Fontaine & Katsunori Yamada, 2012. "Economic Comparison and Group Identity: Lessons from India," Working Papers hal-00711212, HAL.
    19. Sujarwoto Sujarwoto & Gindo Tampubolon, 2015. "Decentralisation and Citizen Happiness: A Multilevel Analysis of Self-rated Happiness in Indonesia," Journal of Happiness Studies, Springer, vol. 16(2), pages 455-475, April.
    20. Benjamin Schalembier, 2016. "The Impact of Exposure to Other Countries on Life Satisfaction: An International Application of the Relative Income Hypothesis," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 128(1), pages 221-239, August.
    21. AfDB AfDB, 2018. "Working Paper 296 - Relative Deprivation and Well-Being of the Rural Youth," Working Paper Series 2423, African Development Bank.
    22. Nadir Preziosi, 2013. "Life is Getting Worse in ESS Data: Is This Due to Micro or Macro Factors?," Bruges European Economic Research Papers 28, European Economic Studies Department, College of Europe.
    23. Xavier Fontaine, 2011. "Envy and Hope," Working Papers hal-00616993, HAL.
    24. Beja Jr., Edsel, 2013. "Does economic prosperity bring about a happier society? Empirical remarks on the Easterlin Paradox debate sans Happiness Adaptation," MPRA Paper 50633, University Library of Munich, Germany.

    More about this item

    Keywords

    income; subjective well-being; comparisons; adaptation; development; revenu; bien-être subjectif; comparaisons; développement;

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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