Wednesday, December 16, 2015

Why doesn't economic growth lead to more happiness?

This is the Easterlin paradox, which I have mentioned in a previous post. Oishi and Kesebir now do an interesting analysis showing that economic growth is not associated with increases in happiness when it is accompanied by growing income inequality.:
One of the most puzzling social science findings in the past half century is the Easterlin paradox: Economic growth within a country does not always translate into an increase in happiness. We provide evidence that this paradox can be partly explained by income inequality. In two different data sets covering 34 countries, economic growth was not associated with increases in happiness when it was accompanied by growing income inequality. Earlier instances of the Easterlin paradox (i.e., economic growth not being associated with increasing happiness) can thus be explained by the frequent concurrence of economic growth and growing income inequality. These findings suggest that a more even distribution of growth in national wealth may be a precondition for raising nationwide happiness.

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