According to the Negative Endogenous Growth (NEG) model, economic systems are susceptible to economic crises because they produce wealth from the erosion of free and common goods, thus feeding unhappiness, decay in social relations, materialism, and excessive consumption. Our aim is to propose a framework to monitor NEG-type economic growth and to allow a more comprehensive understanding of the origins of the last economic crisis. We review the literature and the evidence supporting NEG, and we analyze data on people’s attitudes and values across countries and over time. We conclude that it is possible to monitor a set of social indicators to identify NEG-type economic growth which may increase the risk of future economic crises.
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The American trade balance—imports over exports—significantly worsened during the last 20 years. In 1996, the trade deficit was US$ 1006 per household, whereas in 2000, it amounted to US$ 3787 and in 2007 it reached US$ 6194 per household (Jagannathan et al. 2009).
For more details on the NEG model, please refer to “The NEG Model.”
The three proxies are as follows: trust in others, share of people participating in at least one group or association, and an index of civic cooperation.
The increase in inequality is considered strong when its growth rate is higher than the median growth rate.
The reliability of these measures has been corroborated by experimental evidence from several disciplines. For example, subjective well-being correlates with objective measures of well-being such as the heart rate, blood pressure, duration of Duchenne smiles, and neurological tests of brain activity (Blanchflower and Oswald 2004a; van Reekum et al. 2007). Moreover, subjective measures of well-being are strongly correlated with other proxies of subjective well-being (Schwarz and Strack 1999; Wanous and Hudy 2001; Schimmack et al. 2010) and with the judgments about the respondent’s happiness provided by friends, relatives, or clinical experts (Schneider and Schimmack 2009; Kahneman and Krueger 2006a; Layard 2005).
This method allows to decompose the well-being gap between the initial and the final year of observations identifying how much changes in the levels and in the coefficients of the relevant variables explain the well-being gap. The Blinder-Oaxaca decomposition has been developed in the early 1970s by Oaxaca (1973) and Blinder (1973) to study discrimination between men and women in the labor market. Recently, it has been applied also to other fields, including the literature on subjective well-being (Helliwell and Barrington-Leigh 2010; Becchetti et al. 2010). The decomposition method allows to study “group differences in any (continuous and unbounded) outcome variable” (Jann 2008, p. 1) by dividing the differential of an outcome variable in two parts: the explained one, accounting for differences in observed characteristics of the population, and the unexplained one, measuring the differences in the coefficients between two groups.
Note that although the listed factors are inter-related, none of them can be treated as a necessary consequence of others and thus a redundant factor. All the variables in our model interact and reinforce each other ultimately boosting economic growth. Hence, to be sure that we are observing a system that behaves according to the theoretical predictions of the model, we need to monitor many indicators. This is pivotal to reliably interpret the reality that we are monitoring.
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This article reflects the view of the authors and do not engage in any way STATEC research, ANEC, and funding partners. Francesco Sarracino gratefully acknowledges the support of the Observatoire de la Compé titivité, Ministère de l’Economie, DG Compétitivité, Luxembourg, and STATEC. The authors wish to thank Stefano Bartolini, Luigi Bonatti, and Joshua K. Dubrow for their suggestions and advices. The authors gratefully acknowledge also the constructive work of two anonymous reviewers. The article was prepared within the framework of a subsidy granted to the HSE by the Government of the Russian Federation for the implementation of the Global Competitiveness Program. Possible errors or omissions are entirely the responsibility of the authors who contributed equally to this work.
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Sarracino, F., Mikucka, M. Consume More, Work Longer, and Be Unhappy: Possible Social Roots of Economic Crisis?. Applied Research Quality Life 14, 59–84 (2019). https://doi.org/10.1007/s11482-017-9581-0
- Negative Endogenous Growth
- Subjective well-being
- Social capital
- Working time