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A Relational Explanation of the Happiness Paradox



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1 6 5 2007 Provisional draft Did the Decline in Social Capital Decrease American Happiness A Relational Explanation of the Happiness Paradox S Bartolini University of Siena E Bilancini University of Siena M Pugno University of Cassino Abstract Most popular explanations of the happiness paradox cannot fully account for the lack of growth in U S reported well being during the last thirty years Blanchflower and Oswald 2004 In this paper we test an alternative hypothesis namely that the decline in U S social capital is responsible for what is left unexplained by previous research We provide three main findings First we show that the inclusion of social capital does improve the account of reported happiness Second we provide evidence of a decline in social capital indicators for the period 1975 2004 confirming Putnam s claim to a large extent Finally we show that failed growth of happiness is mostly due to the decline of social capital and in particular to the decline of its relational and intrinsically motivated component 1 Introduction This paper provides evidence that the decline of social capital can contribute to explain the happiness paradox The latter was formulated by Easterlin 1974 who showed two stylized facts that people in industrialized countries are not becoming happier over time despite economic growth and that people with a higher income than others at any given point in time do report higher levels of happiness If more income makes an individual better off why does an increase in the income of all not improve everybody s lot Further evidence of the paradox has been provided by subsequent research and it has attracted interest on the determinants of well being The literature introduced by Easterlin has become a booming industry by now This literature is fed by the abundance of data on self reported well being which proved to contain relevant information on the well being of individuals Econometric studies have detected among others the importance of



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