Making economic growth and well-being compatible: the role of trust and income inequality

Mikucka, Malgorzata and Sarracino, Francesco (2014): Making economic growth and well-being compatible: the role of trust and income inequality.

Abstract

To what extent is economic growth liable to improve people’s subjective well-being in the long run? Recent studies identified three possible answers: economic growth matters a great deal; economic growth does not matter at all; economic growth matters, but other things matter more. Each of these conclusions has different policy implications to promote people’s well-being. Despite the progress of social science research, the disagreement persists for at least two reasons: first, current policy conclusions hinge on weak methodological grounds; second, the literature missed to identify the conditions shaping the relationship between economic growth and well-being. Our paper addresses these issues overcoming some of the methodological shortcomings of previous literature. Additionally, we test the hypotheses that economic growth has a positive effect on subjective well-being in presence of increasing social trust and decreasing income inequality. To this aim we use multilevel regression analysis and the integrated World Values Survey - European Values Study data-set. We confirm previous evidence showing that in the long run economic growth does not increase people’s well-being. We also document that decreasing income inequality and non decreasing social trust allow a long-term positive relationship between economic growth and subjective well-being.

• Item Type: MPRA Paper
• Language: English
• Keywords: economic growth, subjective well-being, social trust, income inequality, Easterlin paradox, sustainability
• Subjects: D - Microeconomics > D6 - Welfare Economics > D60 - General; I - Health, Education, and Welfare > I0 - General; I - Health, Education, and Welfare > I1 - Health; I - Health, Education, and Welfare > I3 - Welfare, Well-Being, and Poverty > I31 - General Welfare, Well-Being

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