Slides of the first part of the course of Social Economics, University of Siena, May 2011

1. Faculty of Economics - University of Siena
Social capital,
economic growth &
well-being
Introduction
Subjective well-being
the evolution over
Social capital, economic growth and well-being time of SWB
International
differences in
well-being
the Easterlin paradox
Francesco Sarracino
Social capital and
Subjective well-being
Population et emploi Social capital predicts
CEPS/Instead, Differdange happiness
Luxembourg SC as a predictor of
SWB trends at
francesco.sarracino@ceps.lu micro-level
US work hours
03 May 2011 NEG model
An example: guard
labor
testing NEG model
Buying alone
F. Sarracino Social capital, economic growth & well-being 03 May 2011 1 / 97

2. Introduction
Social capital,
economic growth &
well-being
Introduction
Subjective well-being
Economists have always been interested in people’s well-being the evolution over
time of SWB
International
differences in
well-being
the Easterlin paradox
Social capital and
Subjective well-being
Social capital predicts
happiness
SC as a predictor of
SWB trends at
micro-level
US work hours
NEG model
An example: guard
labor
testing NEG model
Buying alone
F. Sarracino Social capital, economic growth & well-being 03 May 2011 2 / 97

3. Introduction
Social capital,
economic growth &
well-being
Introduction
Subjective well-being
Economists have always been interested in people’s well-being the evolution over
time of SWB
International
differences in
but, how do we measure it? well-being
the Easterlin paradox
Social capital and
Subjective well-being
Social capital predicts
happiness
SC as a predictor of
SWB trends at
micro-level
US work hours
NEG model
An example: guard
labor
testing NEG model
Buying alone
F. Sarracino Social capital, economic growth & well-being 03 May 2011 2 / 97

4. Introduction
Social capital,
economic growth &
well-being
Introduction
Subjective well-being
Economists have always been interested in people’s well-being the evolution over
time of SWB
International
differences in
but, how do we measure it? well-being
the Easterlin paradox
GDP (under the belief that a higher income may not increase
Social capital and
individual’s well-being, but it will not reduce it for sure) Subjective well-being
Social capital predicts
happiness
SC as a predictor of
SWB trends at
micro-level
US work hours
NEG model
An example: guard
labor
testing NEG model
Buying alone
F. Sarracino Social capital, economic growth & well-being 03 May 2011 2 / 97

5. Introduction
Social capital,
economic growth &
well-being
Introduction
Subjective well-being
Economists have always been interested in people’s well-being the evolution over
time of SWB
International
differences in
but, how do we measure it? well-being
the Easterlin paradox
GDP (under the belief that a higher income may not increase
Social capital and
individual’s well-being, but it will not reduce it for sure) Subjective well-being
Social capital predicts
happiness
promoting economic development became the main tool to raise SC as a predictor of
SWB trends at
well-being micro-level
US work hours
NEG model
An example: guard
labor
testing NEG model
Buying alone
F. Sarracino Social capital, economic growth & well-being 03 May 2011 2 / 97

6. Introduction
Social capital,
economic growth &
well-being
but there are many aspects that strongly concern people’s Introduction
well-being and that are only partially accounted for by GDP: Subjective well-being
the evolution over
time of SWB
International
differences in
well-being
the Easterlin paradox
Social capital and
Subjective well-being
Social capital predicts
happiness
SC as a predictor of
SWB trends at
micro-level
US work hours
NEG model
An example: guard
labor
testing NEG model
Buying alone
F. Sarracino Social capital, economic growth & well-being 03 May 2011 3 / 97

7. Introduction
Social capital,
economic growth &
well-being
but there are many aspects that strongly concern people’s Introduction
well-being and that are only partially accounted for by GDP: Subjective well-being
the evolution over
people declare themselves isolated and lonely; time of SWB
International
differences in
well-being
the Easterlin paradox
Social capital and
Subjective well-being
Social capital predicts
happiness
SC as a predictor of
SWB trends at
micro-level
US work hours
NEG model
An example: guard
labor
testing NEG model
Buying alone
F. Sarracino Social capital, economic growth & well-being 03 May 2011 3 / 97

8. Introduction
Social capital,
economic growth &
well-being
but there are many aspects that strongly concern people’s Introduction
well-being and that are only partially accounted for by GDP: Subjective well-being
the evolution over
people declare themselves isolated and lonely; time of SWB
International
unsafety of the social environment; differences in
well-being
the Easterlin paradox
Social capital and
Subjective well-being
Social capital predicts
happiness
SC as a predictor of
SWB trends at
micro-level
US work hours
NEG model
An example: guard
labor
testing NEG model
Buying alone
F. Sarracino Social capital, economic growth & well-being 03 May 2011 3 / 97

9. Introduction
Social capital,
economic growth &
well-being
but there are many aspects that strongly concern people’s Introduction
well-being and that are only partially accounted for by GDP: Subjective well-being
the evolution over
people declare themselves isolated and lonely; time of SWB
International
unsafety of the social environment; differences in
well-being
cities are polluted; the Easterlin paradox
Social capital and
Subjective well-being
Social capital predicts
happiness
SC as a predictor of
SWB trends at
micro-level
US work hours
NEG model
An example: guard
labor
testing NEG model
Buying alone
F. Sarracino Social capital, economic growth & well-being 03 May 2011 3 / 97

10. Introduction
Social capital,
economic growth &
well-being
but there are many aspects that strongly concern people’s Introduction
well-being and that are only partially accounted for by GDP: Subjective well-being
the evolution over
people declare themselves isolated and lonely; time of SWB
International
unsafety of the social environment; differences in
well-being
cities are polluted; the Easterlin paradox
trust in others and honesty are declining; Social capital and
Subjective well-being
Social capital predicts
happiness
SC as a predictor of
SWB trends at
micro-level
US work hours
NEG model
An example: guard
labor
testing NEG model
Buying alone
F. Sarracino Social capital, economic growth & well-being 03 May 2011 3 / 97

11. Introduction
Social capital,
economic growth &
well-being
but there are many aspects that strongly concern people’s Introduction
well-being and that are only partially accounted for by GDP: Subjective well-being
the evolution over
people declare themselves isolated and lonely; time of SWB
International
unsafety of the social environment; differences in
well-being
cities are polluted; the Easterlin paradox
trust in others and honesty are declining; Social capital and
Subjective well-being
it is more and more difficult to find a place to enjoy social Social capital predicts
happiness
relationship (unless mediated by commercial activities) (Diener
SC as a predictor of
and Seligman, 2004; Frey and Stutzer, 2002b). SWB trends at
micro-level
US work hours
NEG model
An example: guard
labor
testing NEG model
Buying alone
F. Sarracino Social capital, economic growth & well-being 03 May 2011 3 / 97

12. Introduction
Social capital,
economic growth &
well-being
but there are many aspects that strongly concern people’s Introduction
well-being and that are only partially accounted for by GDP: Subjective well-being
the evolution over
people declare themselves isolated and lonely; time of SWB
International
unsafety of the social environment; differences in
well-being
cities are polluted; the Easterlin paradox
trust in others and honesty are declining; Social capital and
Subjective well-being
it is more and more difficult to find a place to enjoy social Social capital predicts
happiness
relationship (unless mediated by commercial activities) (Diener
SC as a predictor of
and Seligman, 2004; Frey and Stutzer, 2002b). SWB trends at
micro-level
US work hours
Is development missing to provide promised benefits? NEG model
An example: guard
labor
testing NEG model
Buying alone
F. Sarracino Social capital, economic growth & well-being 03 May 2011 3 / 97

13. Introduction
Social capital,
economic growth &
well-being
Introduction
Subjective well-being
the evolution over
time of SWB
Success in improving or not people’s well-being depends on the International
differences in
“quality” of development (Helliwell, 2008). well-being
the Easterlin paradox
Social capital and
Subjective well-being
Social capital predicts
happiness
SC as a predictor of
SWB trends at
micro-level
US work hours
NEG model
An example: guard
labor
testing NEG model
Buying alone
F. Sarracino Social capital, economic growth & well-being 03 May 2011 4 / 97

14. Introduction
Social capital,
economic growth &
well-being
Introduction
Subjective well-being
the evolution over
time of SWB
Success in improving or not people’s well-being depends on the International
differences in
“quality” of development (Helliwell, 2008). well-being
the Easterlin paradox
Social capital and
Present work sets in this debate supporting the idea that the social Subjective well-being
quality of economic growth does matter a great deal for Social capital predicts
happiness
well-being. SC as a predictor of
SWB trends at
micro-level
US work hours
NEG model
An example: guard
labor
testing NEG model
Buying alone
F. Sarracino Social capital, economic growth & well-being 03 May 2011 4 / 97

15. Three measures of well-being
Social capital,
economic growth &
well-being
Introduction
Well-being can be proxied by: Subjective well-being
happiness the evolution over
time of SWB
life satisfaction International
differences in
objective data: mental illnesses, suicides, alcoholism, drugs well-being
abuse, psychopharmaca, etc. the Easterlin paradox
Social capital and
Subjective well-being
Social capital predicts
happiness
Happiness and life satisfaction are called subjective well-being SC as a predictor of
SWB trends at
(SWB) micro-level
US work hours
Subjective well-being (SWB): individual’s evaluation of its
NEG model
own life regarded as a whole (Helliwell, 2008)
An example: guard
labor
testing NEG model
Buying alone
F. Sarracino Social capital, economic growth & well-being 03 May 2011 5 / 97

16. Observing SWB (World Values Survey)
Social capital,
economic growth &
well-being
Happiness:
Introduction
“Taking all things together, would you say you are:”
Subjective well-being
1 “very happy” the evolution over
time of SWB
2 “quite happy” International
differences in
3 “not very happy” well-being
the Easterlin paradox
4 “not at all happy”
Social capital and
Subjective well-being
Social capital predicts
happiness
SC as a predictor of
SWB trends at
micro-level
US work hours
NEG model
An example: guard
labor
testing NEG model
Buying alone
F. Sarracino Social capital, economic growth & well-being 03 May 2011 6 / 97

17. Observing SWB (World Values Survey)
Social capital,
economic growth &
well-being
Happiness:
Introduction
“Taking all things together, would you say you are:”
Subjective well-being
1 “very happy” the evolution over
time of SWB
2 “quite happy” International
differences in
3 “not very happy” well-being
the Easterlin paradox
4 “not at all happy”
Social capital and
Subjective well-being
Social capital predicts
Life satisfaction: happiness
“All things considered, how satisfied are you with your life as a SC as a predictor of
SWB trends at
whole these days?” Answers range on a 1 to 10 points scale: micro-level
US work hours
1 “dissatisfied” NEG model
.
. An example: guard
. labor
testing NEG model
10 “satisfied”
Buying alone
F. Sarracino Social capital, economic growth & well-being 03 May 2011 6 / 97

18. Reliability of SWB
Social capital,
economic growth &
well-being
Reliability Introduction
Subjective well-being
the evolution over
data on SWB are: time of SWB
International
consistent with more objective measures of well-being (heart differences in
well-being
rate, blood pressure, Duchenne smile, brain scanners, suicide)
the Easterlin paradox
(Blanchflower and Oswald, 2008a; Van Reekum et al., 2007); Social capital and
Subjective well-being
highly correlated with other proxies of SWB (Schwarz and
Social capital predicts
Strack, 1999; Wanous and Hudy, 2001; Schimmack et al., happiness
2009); SC as a predictor of
SWB trends at
micro-level
consistent with evaluations about the respondent’s happiness
US work hours
provided by friends, relatives or clinical experts (Schneider and
NEG model
Schimmack, 2009; Kahneman and Krueger, 2006; Layard,
An example: guard
2005). labor
testing NEG model
Buying alone
F. Sarracino Social capital, economic growth & well-being 03 May 2011 7 / 97

19. The evolution over time of SWB
Social capital,
economic growth &
well-being
Introduction
Subjective well-being
the evolution over
SWB data are easy and cheap to collect and proved to unveil time of SWB
interesting and consistent patterns about modern societies International
differences in
well-being
the Easterlin paradox
Social capital and
Subjective well-being
Social capital predicts
happiness
SC as a predictor of
SWB trends at
micro-level
US work hours
NEG model
An example: guard
labor
testing NEG model
Buying alone
F. Sarracino Social capital, economic growth & well-being 03 May 2011 8 / 97

20. The evolution over time of SWB
Social capital,
economic growth &
well-being
Introduction
Subjective well-being
the evolution over
SWB data are easy and cheap to collect and proved to unveil time of SWB
interesting and consistent patterns about modern societies International
differences in
well-being
the Easterlin paradox
How far is general income growth likely to increase average Social capital and
Subjective well-being
happiness?
Social capital predicts
happiness
SC as a predictor of
SWB trends at
micro-level
this is a question about time series relationships
US work hours
NEG model
An example: guard
labor
testing NEG model
Buying alone
F. Sarracino Social capital, economic growth & well-being 03 May 2011 8 / 97

21. e della percentuale di individui che si dichiarano molto felici, nel periodo
the Easterlin paradox
1946-1996.
Fig. 1 Reddito e felicità medi in USA, 1946-1996
Social capital,
economic growth &
well-being
Introduction
Subjective well-being
the evolution over
time of SWB
International
differences in
well-being
the Easterlin paradox
Social capital and
Subjective well-being
Social capital predicts
happiness
SC as a predictor of
SWB trends at
micro-level
US work hours
NEG model
An example: guard
labor
Figure: Income and happiness in US 1946 - 1996. Source: Layard, 2003 testing NEG model
Il grafico mostra che, a fronte di una forte tendenza crescente del Buying alone
reddito medio, la percentuale di individui molto felici presenta una tendenza
alla F. Sarracino
diminuzione. La domanda che grafici come questo & well-being è: perchè in May 2011
Social capital, economic growth suscitano 03 9 / 97

22. Health
Social capital,
economic growth &
well-being
Introduction
Subjective well-being
the evolution over
time of SWB
International
differences in
well-being
the Easterlin paradox
Social capital and
Subjective well-being
Social capital predicts
happiness
SC as a predictor of
SWB trends at
micro-level
US work hours
NEG model
An example: guard
labor
testing NEG model
Buying alone
F. Sarracino Social capital, economic growth & well-being 03 May 2011 10 / 97

23. Information technologies
Social capital,
economic growth &
well-being
Introduction
Subjective well-being
the evolution over
time of SWB
International
differences in
well-being
the Easterlin paradox
Social capital and
Subjective well-being
Social capital predicts
happiness
SC as a predictor of
SWB trends at
micro-level
US work hours
NEG model
An example: guard
labor
testing NEG model
Buying alone
F. Sarracino Social capital, economic growth & well-being 03 May 2011 11 / 97

24. Travels
Social capital,
economic growth &
well-being
Introduction
Subjective well-being
the evolution over
time of SWB
International
differences in
well-being
the Easterlin paradox
Social capital and
Subjective well-being
Social capital predicts
happiness
SC as a predictor of
SWB trends at
micro-level
US work hours
NEG model
An example: guard
labor
testing NEG model
Buying alone
F. Sarracino Social capital, economic growth & well-being 03 May 2011 12 / 97

25. But...
Social capital,
economic growth &
well-being
Introduction
Subjective well-being
the evolution over
time of SWB
International
differences in
well-being
the Easterlin paradox
Social capital and
Subjective well-being
Social capital predicts
happiness
SC as a predictor of
SWB trends at
micro-level
US work hours
NEG model
An example: guard
labor
testing NEG model
Buying alone
F. Sarracino Social capital, economic growth & well-being 03 May 2011 13 / 97

26. Social capital,
economic growth &
well-being
Introduction
Subjective well-being
the evolution over
time of SWB
International
differences in
well-being
the Easterlin paradox
Social capital and
Subjective well-being
Social capital predicts
happiness
SC as a predictor of
SWB trends at
micro-level
US work hours
NEG model
An example: guard
labor
economic growth seems to be associated to undesirable side-effects testing NEG model
Buying alone
on well-being.
F. Sarracino Social capital, economic growth & well-being 03 May 2011 14 / 97

27. Well-being trends across countries
Social capital,
economic growth &
well-being
Introduction
Subjective well-being
the evolution over
time of SWB
International
differences in
There are international differences in long-term trends of SWB well-being
the Easterlin paradox
for instance: SWB slightly increased in several EU countries and
Social capital and
decreased in the US in the last 30 years. Subjective well-being
Social capital predicts
happiness
SC as a predictor of
SWB trends at
micro-level
US work hours
NEG model
An example: guard
labor
testing NEG model
Buying alone
F. Sarracino Social capital, economic growth & well-being 03 May 2011 15 / 97

28. Declining trends in US happiness
US declining happiness Social capital,
economic growth &
well-being
Introduction
Subjective well-being
the evolution over
time of SWB
International
differences in
well-being
the Easterlin paradox
Social capital and
Subjective well-being
Social capital predicts
happiness
SC as a predictor of
SWB trends at
micro-level
US work hours
NEG model
An example: guard
Source: Stevenson and Wolfers 2008, GSS data labor
testing NEG model
Figure: Source: Stevenson and Wolfers, 2008 (GSS data).
Buying alone
F. Sarracino Social capital, economic growth & well-being 03 May 2011 16 / 97

29. Declining trends in US happiness
Social capital,
economic growth &
well-being
Introduction
Subjective well-being
the evolution over
time of SWB
International
differences in
well-being
the Easterlin paradox
Social capital and
Subjective well-being
Social capital predicts
happiness
SC as a predictor of
SWB trends at
micro-level
US work hours
NEG model
An example: guard
labor
testing NEG model
Figure: Source: Stevenson and Wolfers, 2008 (GSS data).
Buying alone
F. Sarracino Social capital, economic growth & well-being 03 May 2011 17 / 97

30. Social capital,
economic growth &
well-being
Introduction
Subjective well-being
the evolution over
time of SWB
What does predict international differences in the trends of International
differences in
well-being? well-being
the Easterlin paradox
Social capital and
Subjective well-being
Social capital predicts
happiness
SC as a predictor of
SWB trends at
micro-level
US work hours
NEG model
An example: guard
labor
testing NEG model
Buying alone
F. Sarracino Social capital, economic growth & well-being 03 May 2011 18 / 97

31. Social capital,
economic growth &
well-being
Introduction
Subjective well-being
the evolution over
time of SWB
What does predict international differences in the trends of International
differences in
well-being? well-being
the Easterlin paradox
Social capital and
GDP trends do not! Subjective well-being
Social capital predicts
happiness
people do not become happier when a country’s income increases. SC as a predictor of
SWB trends at
micro-level
US work hours
NEG model
An example: guard
labor
testing NEG model
Buying alone
F. Sarracino Social capital, economic growth & well-being 03 May 2011 18 / 97

32. The Easterlin paradox
Social capital,
economic growth &
well-being
Introduction
Subjective well-being
The trends of happiness and income are unrelated in the long run the evolution over
time of SWB
in: International
differences in
developed countries; well-being
developing countries; the Easterlin paradox
Social capital and
all countries together. Subjective well-being
Social capital predicts
happiness
SC as a predictor of
SWB trends at
Easterlin and Angelescu (2009) micro-level
US work hours
NEG model
An example: guard
labor
testing NEG model
Buying alone
F. Sarracino Social capital, economic growth & well-being 03 May 2011 19 / 97

33. The Easterlin paradox
Social capital,
economic growth &
well-being
Easterlin and Angelescu (2009)
Introduction
Subjective well-being
the evolution over
time of SWB
International
differences in
well-being
the Easterlin paradox
Social capital and
Subjective well-being
Social capital predicts
happiness
SC as a predictor of
SWB trends at
micro-level
US work hours
NEG model
An example: guard
labor
testing NEG model
Figure: Source: Easterlin and Angelescu, 2009 Buying alone
F. Sarracino Social capital, economic growth & well-being 03 May 2011 20 / 97

34. The Easterlin paradox
Social capital,
economic growth &
Easterlin and Angelescu (2009)
g ( ) well-being
Introduction
Subjective well-being
the evolution over
time of SWB
International
differences in
well-being
the Easterlin paradox
Social capital and
Subjective well-being
Social capital predicts
happiness
SC as a predictor of
SWB trends at
micro-level
US work hours
NEG model
An example: guard
labor
testing NEG model
Figure: Source: Easterlin and Angelescu, 2009 Buying alone
F. Sarracino Social capital, economic growth & well-being 03 May 2011 20 / 97

35. The Easterlin paradox
Social capital,
economic growth &
Easterlin and Angelescu (2009) well-being
Introduction
Subjective well-being
the evolution over
time of SWB
International
differences in
well-being
the Easterlin paradox
Social capital and
Subjective well-being
Social capital predicts
happiness
SC as a predictor of
SWB trends at
micro-level
US work hours
NEG model
An example: guard
labor
testing NEG model
Buying alone
Figure: Source: Easterlin and Angelescu, 2009
F. Sarracino Social capital, economic growth & well-being 03 May 2011 20 / 97

36. Conventional explanations
Social capital,
economic growth &
well-being
Aspirations: after a while people adapt to their living standard Introduction
by raising their aspirations. SWB is predicted by past income; Subjective well-being
the evolution over
Social comparisons: people compare themselves with others time of SWB
and set their aspirations accordingly. SWB is predicted by International
differences in
reference income. well-being
the Easterlin paradox
Social capital and
Subjective well-being
Social capital predicts
happiness
SC as a predictor of
SWB trends at
micro-level
US work hours
NEG model
An example: guard
labor
testing NEG model
Buying alone
F. Sarracino Social capital, economic growth & well-being 03 May 2011 21 / 97

37. Conventional explanations
Social capital,
economic growth &
well-being
Aspirations: after a while people adapt to their living standard Introduction
by raising their aspirations. SWB is predicted by past income; Subjective well-being
the evolution over
Social comparisons: people compare themselves with others time of SWB
and set their aspirations accordingly. SWB is predicted by International
differences in
reference income. well-being
the Easterlin paradox
two problems arise: Social capital and
Subjective well-being
Social capital predicts
happiness
SC as a predictor of
SWB trends at
micro-level
US work hours
NEG model
An example: guard
labor
testing NEG model
Buying alone
F. Sarracino Social capital, economic growth & well-being 03 May 2011 21 / 97