Abstract
Previous empirical research has been unable to find a sufficient correlation between subjective well-being and per capita income, being hampered by limited longitudinal information and an inability to account for the predictions of competing theories. We bring new evidence to this question by exploiting a long and complete time-series from the Eurobarometer Survey, 1973–2002 allowing an examination of trends in life satisfaction across 15 European countries employing a modified version of Kendall’s Tau. Our results show that while current GDP growth does not affect trends in well-being, accelerations in GDP growth do. In addition, faster GDP growth and faster growth of government consumption than in neighbouring countries induces positive trends in life satisfaction. Our findings are consistent with the predictions of aspirations theory and the theory of reference group comparisons.
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Notes
The quote is from William Shakespeare’s The Merchant of Venice, Act 1, Scene 2.
The three countries are atypical in the sense that the other countries for which data are available for the full observation period do not exhibit any strong trends. However, see also Veenhoven (2005) for the long-run trends in eight European countries. A full set of plots can be obtained from the authors.
A full number of observations are only available for nine of the countries, while data for the six remaining countries are included from the time they enter the EU. The number is further limited by missing data on control variables for certain countries.
All results in the following are estimated using OLS, which is a valid estimation strategy here as tests reject the three standard problems of autocorrelation, heteroscedasticity and contemporaneous correlation. In Table 3, column 2—that will be used as a baseline specification—the Durbin–Watson test rejects problems of autocorrelation (DW = 2.129), White’s general test for heteroscedasticity clearly rejects that the residuals are heteroscedastic (χ2 (10) = 6.32; p < 0.79), and contemporaneous correlation seems not to be a problem as the correlation between the trend in a country and the average trend in its neighbouring countries is weak (r = 0.28).
It should be noted that the relative growth of the current account is never significant. This result is hence contrary to our general findings regarding the dimension of the variables.
It may be worth noting that an earlier working paper version of this paper also explored the heterogeneity of the GDP effect. Our further results in that paper suggest that life satisfaction in countries in which the median voter political ideology is placed to the right on a traditional left-to-right scale is more sensitive to growth changes than countries placed to the left.
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Earlier versions of the paper have been presented at a conference at the University of Trento and at workshops at Aarhus School of Business and the Danish National Institute of Social Research. Comments from participants at these occasions are gratefully acknowledged, as are those of our three referees.
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Bjørnskov, C., Gupta, N.D. & Pedersen, P.J. Analysing trends in subjective well-being in 15 European countries, 1973–2002. J Happiness Stud 9, 317–330 (2008). https://doi.org/10.1007/s10902-007-9055-4
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DOI: https://doi.org/10.1007/s10902-007-9055-4