Munich Personal RePEc Archive

Economic growth and well-being beyond the Easterlin paradox

Sarracino, Francesco and O'Connor, Kelsey J. (2019): Economic growth and well-being beyond the Easterlin paradox.

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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.

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