IDEAS home Printed from https://ideas.repec.org/p/old/dpaper/447.html
   My bibliography  Save this paper

Explaining Happiness Trends in Europe by Welfare Policies and Economic Growth: Easterlin and O Connor Revisited

Author

Listed:
  • Heinz Welsch

    (University of Oldenburg, Department of Economics)

Abstract

Easterlin and O’Connor (PNAS 2022) have investigated which economic, social, political, and ecological factors explain long-run (36-year) changes in European countries’ happiness (life satisfaction). Considering six potential predictors advanced in the pertinent literature, they found only rising welfare state generosity to be significantly associated with rising happiness. Noticing a salient characteristic of the data used – a strong and significant association between happiness trends and initial happiness levels – I modify this analysis by controlling for initial happiness levels and by considering long-run relative changes in addition to absolute changes in happiness. Both modifications respond to the circumstance that happiness scales are bounded so that it is hard for happiness to increase – especially in absolute terms – if it is already high. I find the inclusion of initial happiness to greatly increase the explanatory power (R2) of the regression models considered and, as a consequence, to raise the precision of coefficient estimates. Due to increased precision, not only welfare state generosity but also growth in per-capita GDP is found to significantly predict both absolute and relative long-run changes in countries’ happiness, whereas other candidate explanatory variables remain insignificant. Welfare state generosity and GDP growth are not only statistically, but also economically significant.

Suggested Citation

  • Heinz Welsch, 2024. "Explaining Happiness Trends in Europe by Welfare Policies and Economic Growth: Easterlin and O Connor Revisited," Working Papers V-447-24, University of Oldenburg, Department of Economics, revised Nov 2024.
    • Handle: RePEc:old:dpaper:447
    as

    Download full text from publisher

    File URL: http://www.uni-oldenburg.de/fileadmin/user_upload/wire/fachgebiete/vwl/V-447-24.pdf
    File Function: First version, 2024
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Angus Deaton, 2008. "Income, Health, and Well-Being around the World: Evidence from the Gallup World Poll," Journal of Economic Perspectives, American Economic Association, vol. 22(2), pages 53-72, Spring.
    2. Di Tella, Rafael & Haisken-De New, John & MacCulloch, Robert, 2010. "Happiness adaptation to income and to status in an individual panel," Journal of Economic Behavior & Organization, Elsevier, vol. 76(3), pages 834-852, December.
    3. Betsey Stevenson & Justin Wolfers, 2008. "Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(1 (Spring), pages 1-102.
    4. Bartolini, Stefano & Sarracino, Francesco, 2014. "Happy for how long? How social capital and economic growth relate to happiness over time," Ecological Economics, Elsevier, vol. 108(C), pages 242-256.
    5. Angus Deaton, 2012. "The financial crisis and the well-being of Americans," Oxford Economic Papers, Oxford University Press, vol. 64(1), pages 1-26, January.
    6. Richard A. Easterlin & Kelsey J. O’Connor, 2022. "Explaining happiness trends in Europe," Decision Analysis, INFORMS, vol. 119(37), pages 2210639119-, September.
    7. Jan-Emmanuel De Neve & George Ward & Femke De Keulenaer & Bert Van Landeghem & Georgios Kavetsos & Michael I. Norton, 2018. "The Asymmetric Experience of Positive and Negative Economic Growth: Global Evidence Using Subjective Well-Being Data," The Review of Economics and Statistics, MIT Press, vol. 100(2), pages 362-375, May.
    8. Welsch, Heinz, 2006. "Environment and happiness: Valuation of air pollution using life satisfaction data," Ecological Economics, Elsevier, vol. 58(4), pages 801-813, July.
    9. Ruut Veenhoven & Floris Vergunst, 2014. "The Easterlin illusion: economic growth does go with greater happiness," International Journal of Happiness and Development, Inderscience Enterprises Ltd, vol. 1(4), pages 311-343.
    10. Easterlin, Richard A., 1995. "Will raising the incomes of all increase the happiness of all?," Journal of Economic Behavior & Organization, Elsevier, vol. 27(1), pages 35-47, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sarracino, Francesco & O'Connor, Kelsey J. & Ono, Hiroshi, 2019. "Making economic growth and well-being compatible: evidence from Japan," MPRA Paper 93010, University Library of Munich, Germany.
    2. Kaiser, Caspar F. & Vendrik, Martinus, 2018. "Different versions of the Easterlin Paradox: New evidence for European countries," Research Memorandum 026, Maastricht University, Graduate School of Business and Economics (GSBE).
    3. BARTOLINI Stefano & SARRACINO Francesco, 2011. "Happy for How Long? How Social Capital and GDP relate to Happiness over Time," LISER Working Paper Series 2011-60, Luxembourg Institute of Socio-Economic Research (LISER).
    4. Cai, Shu & Park, Albert, 2016. "Permanent income and subjective well-being," Journal of Economic Behavior & Organization, Elsevier, vol. 130(C), pages 298-319.
    5. 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.
    6. Easterlin, Richard A., 2017. "Paradox Lost?," Review of Behavioral Economics, now publishers, vol. 4(4), pages 311-339, December.
    7. Michiel Slag & Martijn J. Burger & Ruut Veenhoven, 2019. "Did the Easterlin Paradox apply in South Korea between 1980 and 2015? A case study," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 66(4), pages 325-351, December.
    8. Kapteyn, Arie & Smith, James P. & van Soest, Arthur, 2009. "Life Satisfaction," IZA Discussion Papers 4015, Institute of Labor Economics (IZA).
    9. Proto, Eugenio & Rustichini, Aldo, 2015. "Life satisfaction, income and personality," Journal of Economic Psychology, Elsevier, vol. 48(C), pages 17-32.
    10. Andrew E. Clark & Claudia Senik, 2010. "Will GDP growth increase happiness in developing countries?," PSE Working Papers halshs-00564985, HAL.
    11. Jan-Emmanuel De Neve & George Ward & Femke De Keulenaer & Bert Van Landeghem & Georgios Kavetsos & Michael I. Norton, 2018. "The Asymmetric Experience of Positive and Negative Economic Growth: Global Evidence Using Subjective Well-Being Data," The Review of Economics and Statistics, MIT Press, vol. 100(2), pages 362-375, May.
    12. Gregor Gonza & Anže Burger, 2017. "Subjective Well-Being During the 2008 Economic Crisis: Identification of Mediating and Moderating Factors," Journal of Happiness Studies, Springer, vol. 18(6), pages 1763-1797, December.
    13. Tonzer Lena, 2019. "Elevated Uncertainty during the Financial Crisis: Do Effects on Subjective Well-Being Differ across European Countries?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(2), pages 1-15, April.
    14. Kangmennaang, Joseph & Elliott, Susan J., 2018. "Towards an integrated framework for understanding the links between inequalities and wellbeing of places in low and middle income countries," Social Science & Medicine, Elsevier, vol. 213(C), pages 45-53.
    15. McGuire, Joel & Kaiser, Caspar & Bach-Mortensen, Anders, 2020. "The impact of cash transfers on subjective well-being and mental health in low- and middle- income countries: A systematic review and meta-analysis," SocArXiv ydr54, Center for Open Science.
    16. Elias L. Khalil, 2022. "Solving the income-happiness paradox," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 69(3), pages 433-463, September.
    17. David Alexander Clark, 2011. "Adaptation and development: issues, evidence and policy relevance," Global Development Institute Working Paper Series 15911, GDI, The University of Manchester.
    18. Edsel Beja, 2014. "Income growth and happiness: reassessment of the Easterlin Paradox," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 61(4), pages 329-346, December.
    19. Christopher L. Ambrey & Peter Daniels, 2017. "Happiness and footprints: assessing the relationship between individual well-being and carbon footprints," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 19(3), pages 895-920, June.
    20. Bidani, Benu & Fatou Diagne, Mame & Zaidi, Salman, 2012. "Subjective perceptions of the impact of the global economic crisis in Europe and Central Asia : the household perspective," Policy Research Working Paper Series 5995, The World Bank.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:old:dpaper:447. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catharina Schramm (email available below). General contact details of provider: https://edirc.repec.org/data/fwoldde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.