| 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. Consistent with the Easterlin paradox, higher income is always
associated with higher happiness scores, except in one case: whether growth in
national income yields higher well-being is still hotly debated. The key
question is whether the correlation coefficient is "too small to matter". The
explanations for the small correlation between national income growth and
subjective well-being over time appeal to the nature of growth itself (from
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 those at the individual level. Second,
development is a qualitative process involving take-off points and thresholds.
Such regime changes are visible to the eye through the lens of subjective
satisfaction measures. The case of Transition countries is particularly
impressive in this respect: average life satisfaction scores closely mirrored
changes in GDP for about the first ten years of the transition process, until
the regime became more stable. The greater availability of subjective measures
of well-being in low-income countries would greatly help in the measurement
and monitoring of the different stages and dimensions of the development
process. |