How do economic growth and social capital shape subjective well-being? Old question, new method

Mikucka, Malgorzata;Sarracino, Francesco
(2014) The 4th LCSR International Workshop “Social and Cultural Changes in Cross-National Perspective: Values and Modernization” — Location: Higher School of Economics, Moscow, Russia (28.March.2014)

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  • Mikucka, MalgorzataUCLouvain
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  • Sarracino, FrancescoStatec Luxembourg
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Abstract
The work of Easterlin questioned the relationship between economic growth and life satisfaction. Subsequent research on “Easterlin paradox” provided conflicting evidence, which suggests that the paradox holds in some conditions but not in others. However, these conditions were only rarely investigated by the literature, in part because the debate has been limited by use of country-level aggregated data. Our paper fills this gap by investigating the relationship between economic growth and life satisfaction with individual-level data. Additionally, we test the hypotheses that economic growth has positive effect on subjective well-being in the presence of high social capital and low income inequality. We use large comparative data set of World Values Survey and European Values Study. Multilevel regression allows us to estimate the effect of GDP and economic growth on individual subjective well-being, controlling for its individual-level determinants. We also test if social capital and income inequality moderate this relationship. Our results show that the Easterlin paradox, stating that economic growth does not increase people’s well-being, is true only under specific conditions. In particular, in developed countries, economic growth has a positive effect on life satisfaction if it occurs in conditions of low growth of income inequality, high levels of social trust, and high growth of social capital. However, our results also show that economic growth had a predominantly negative effect on subjective well-being in developing countries. Our study is the first one to re-examine Easterlin paradox with multilevel model and to investigate the conditions under which it holds. Our results point out to the importance of socially sustainable economic growth.
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Mikucka, M., & Sarracino, F. (2014). How do economic growth and social capital shape subjective well-being? Old question, new method. The 4th LCSR International Workshop “Social and Cultural Changes in Cross-National Perspective: Values and Modernization”, Higher School of Economics, Moscow, Russia. https://hdl.handle.net/2078.5/77780