The Paradox of Growth and Welfare Disparities in the EU – Cross-Country Patterns

Abstract

Purpose | This article develops a new objective welfare index for 25 European Union countries, integrating economic, social, environmental, labour market, inequality, knowledge-based, and health dimensions. The goal is to investigate the relationships between the new welfare index, economic growth and self-reported life satisfaction. Research method | The analysis employs taxonomic analysis based on proximity to an abstract ideal solution and Spearman and Kendall correlation coefficients. Results | Contrary to the post-growth theories, a persistent, positive, and linear relationship is identified at the aggregate level between past average economic growth per capita and contemporary welfare among the advanced Eurozone economies. Conversely, non-Eurozone countries and recent euro adopters from Eastern Europe exhibit a paradoxical negative correlation. The non-linear relationship between the contemporary GDP per capita and welfare, identified at the cross-country level, indicates diminishing returns to welfare as GDP per capita approaches the 9th percentile. Welfare strongly correlates with self-reported life satisfaction; however, discrepancies reveal optimistic (Italy, Luxembourg, Denmark, Finland) and pessimistic nations (Hungary, Portugal, Poland, Slovenia, France, Ireland). Originality / value / implications / recommendations | The article’s findings challenge traditional theories and provide new insights for the design of sustainable welfare policies. This is the first study to uncover and systematically analyse divergent patterns among Eurozone countries, more recent euro adopters from Eastern Europe, and non-Eurozone economies.