Does economic growth enhance life satisfaction? The case of Germany

Purpose – The purpose of this paper is to examine whether economic growth enhances life satisfaction. It provides a conceptual solution to the heavily debated Easterlin paradox which states that aggregate income positively relates to life satisfaction in onetime international comparisons but not in longitudinal analyses. First empirical results are presented for Germany. Design/methodology/approach – The present study uses path analysis to capture not only direct but also mediated effects of economic growth on life satisfaction. Findings – The paper finds that economic growth does enhance life satisfaction over time. The effect is not direct but mediated via consumer confidence, customer satisfaction, income satisfaction, health satisfaction and job satisfaction. Modeled by consumer confidence, adaptive expectations reduce this effect but cannot entirely compensate for it, as suggested by literature. In addition to this negative compensatory effect which is mediated by customer satisfaction, consumer confidence has a positive direct influence on life satisfaction. Research limitations/implications – Since the history of aggregate customer satisfaction measurement is still young, this empirical analysis should be seen as pioneer work. Future research on the Easterlin paradox should utilize future data, model mediated relationships and time lags, and integrate customer satisfaction and consumer confidence. Practical implications – Economic growth strategies are successful in raising life satisfaction. Governments should not only pay attention to quantitative but also to qualitative growth. Collective optimism can improve life satisfaction. Originality/value – This study contributes to solving the Easterlin paradox. Unlike the extant literature on the Easterlin paradox, this paper integrates national customer satisfaction and consumer confidence into a sociologic model and explicitly accounts for mediated effects. National customer satisfaction is used to model qualitative aspects of economic growth.