Europe in Times of Distress: Assessing Life Satisfaction from 2002 to 2012

This thesis explores the complex economic conditions under which life satisfaction can flourish or be thwarted. It identifies three trends in life satisfaction in Europe - rising, stagnant, and declining – a theme which has been the subject of a long- standing debate focusing upon the Easterlin paradox. I measure the relationship between life satisfaction and income-related factors in 24 European countries from 2002 to 2012 using European Social Survey data. Results of pooled OLS CLSE regression analysis show that income is significantly correlated with life satisfaction, but only up to the point at which financial distress is included in the analysis. The negative effect of financial distress on life satisfaction is mitigated by national wealth and (to an extent) type of social policy. In addition, the ‘tunnel effect’ was found to be still present in CEE nations in the years 2002-2012 despite the end of their transition period, and in the north of Europe status comparisons prevailed. But this effect was only relevant for people with higher levels of income. Therefore, the thesis confirms Veenhoven’s basic needs theory emphasizing the importance of the livability of the society for those less well- off. The ‘tunnel effect’ recorded in CEE countries compensates for lower standards of living as it enables the toleration of income inequality in the context of rising living standards for all. Conversely, the negative effect of income comparison on subjective well-being in the north of Europe can be moderated by the already very high and growing livability of the society. I conclude that the livability of a society makes the Easterlin paradox an illusion for some countries in Europe, while for others it makes it a reality.