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Will GDP Growth Increase Happiness in Developing Countries?

Abstract : This paper asks what low-income countries can expect from growth in terms of happiness. It interprets the set of available international evidence pertaining to the relationship between income growth and subjective well-being. Conforming to the Easterlin paradox, higher income always correlates with higher happiness, except in one case: whether national income growth yields higher well-being is still hotly debated; essentially, the question is whether the correlation coefficient is “too small to matter”. The explanations for the small correlation between income growth and subjective well-being over time appeal to the nature of growth itself (e.g. negative side-effects such as pollution), and to the psychological importance of relative concerns and adaptation. The available evidence contains two important lessons: income comparisons do seem to affect subjective well-being even in very poor countries; however, adaptation may be more of a rich country phenomenon. Our stand is that the idea that growth will increase happiness in low-income countries cannot be rejected on the basis of the available evidence. First, cross-country time-series analyses are based on aggregate measures, which are less reliable than individual ones. Second, development is a qualitative process that involves take-offs and thresholds. Such regime changes are eye-visible through the lens of subjective satisfaction measures. The case of Transition countries is particularly impressive in this respect: average life satisfaction scores closely mirror changes in GDP for about the first ten years of the transition process, until the regime becomes more stable. If subjective measures of well-being were made available in low-income countries, they would certainly help measuring and monitoring the different stages and dimensions of the development process.
Keywords : Economic growth
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  • HAL Id : halshs-00654707, version 1
  • PRODINRA : 317380

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Andrew E. Clark, Claudia Senik. Will GDP Growth Increase Happiness in Developing Countries?. 8th Conference AFD-EUDN. Measure for Measure: How well do we Measure Development?, Agence Française de Développement (AFD). Paris, FRA.; European Development Research Network (EUDN). Namur, BEL., Dec 2010, Paris, France. ⟨halshs-00654707⟩

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