Chapter 15 When Does Economic Growth Improve Well-Being? Francesco Sarracino Abstract Is economic growth the way to pursue better lives? After the second world war, many industrialized countries experienced an unprecedented economic growth that significantly improved people’s living conditions. However, the raising wealth did not result in higher well-being. This conclusion is inconsistent with the well established belief that economic growth is the way to improve the human lot. In this chapter I discuss the evidence on some of the conditions for durable improvements in well-being, namely promoting social capital, and reducing income inequality. I conclude that the quality of growth matters for well-being and that it is possible to adopt policies to make economic growth and well-being compatible. 15.1 Introduction As governments worldwide seek to promote well-being via economic growth, scholars hold mixed opinions. Thus, governments wishing to improve their citizens’ well-being miss clear indications about which policies to adopt. Researchers have been investigating whether economic growth is the way to pursue higher well-being for many years. To date the answer seems to be: “it depends”. While the initial literature polarized on two opposite views, the supporters and the opponents of economic growth as a way to improve well-being, some recent evidence suggests that the way to better lives depends on the quality of economic growth. United States and China, for example, are two paradigmatic cases of economic growth that failed to increase well-being. In both countries increasing income inequality and declining social capital are among the causes of such disappointing results. Whether economic growth increases well-being is a matter of its social, political, economic, cultural and institutional features: if economic growth is compatible with F. Sarracino (*) Institut National de la Statistique et des Etudes Economiques du Grand-Duché du Luxembourg (STATEC), Luxembourg City, Luxembourg LCSR National Research University Higher School of Economics, Moscow, Russia e-mail: Francesco.Sarracino@statec.etat.lu © Springer Nature Switzerland AG 2019 M. Rojas (ed.), The Economics of Happiness, https://doi.org/10.1007/978-3-030-15835-4_15 355