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Structural changes in economic growth and well-being. The case of Italy's parabola

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  • Pugno, Maurizio
  • Sarracino, Francesco

Abstract

The controversies on the relationship (or `gradient') between GDP and subjective well-being oppose those who claim that the gradient is positive and stable around the world to those who argue that long-run trends of subjective well-being are flat despite economic growth. The possible existence of structural breaks of the gradient within the same country is a challenge to both views. By focusing on the case of Italy, we show that the long-run trends of GDP and of well-being turned from increasing to decreasing, and the gradient exhibits a rise through two structural breaks. Macro and micro analyses explain why the gradient changes, and we find evidence consistent with the `loss aversion' hypothesis. In addition, the gradient changed because the erosion of trust in others, the increase of financial dissatisfaction and worsened health hinder well-being independently from income.

Suggested Citation

  • Pugno, Maurizio & Sarracino, Francesco, 2019. "Structural changes in economic growth and well-being. The case of Italy's parabola," MPRA Paper 94150, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:94150
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    More about this item

    Keywords

    structural breaks; subjective well-being; economic growth; Easterlin paradox; trends; loss aversion;

    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • 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
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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