The Well-Being Gap during the Great Recession: The Role of Growth and Institutions

Abstract

The purpose of this paper is to examine the well-being dynamics across European countries during the Great Recession and to investigate the potential role of the quality of formal institutions in mitigating the negative effect of the economic downturn. This study uses the club convergence methodology by Phillips and Sul (2007; 2009) to group EU-28 countries that present similar features in terms of well-being during the period 2005-2017. The study also applies probit models to investigate the potential role of several social and institutional characteristics that are supposed to affect subjective well-being levels. The results show the existence of a “well-being gap” among European countries. The economic downturn started in 2008 has impacted the perceived well-being more in low-income and low-growth countries (less developed transition and Southern countries), than in high-income and more developed transition countries. The study also shows that countries that present well-functioning institutional systems and, more in general, good institutional performances show higher life satisfaction levels and tend to be more resilient to the negative effects generated by the economic shock.

Life satisfaction and tax morale: The role of trust in government and cultural orientation

“…As discussed earlier, taxpayers may assume opportunistic behaviors (i.e., tax cheating) when public authorities lose credibility in the eyes of their citizens. Likewise, Ciziceno and Pizzuto (2020) find that the evolution patterns of life satisfaction across EU-28 countries in the aftermath of the Great Recession are systematically affected by good institutional performances.…”