Is Europe Faring Well with Growth? Evidence from a Welfare Comparison in the Eu-15 (1995-2018)

This paper is the first to calculate the ISEW, for the EU-15 countries in a standardized way. It builds on a case study by Van der Slycken and Bleys (2023) that puts forward a “2.0 methodology” with two distinct ISEWs that deal with cross-time and cross-boundary issues. Welfare and GDP per capita improved in the EU-15 between 1995 and 2018. Yet, there is an important divergence. Welfare improved by 10,5% and 13,4% - less than one third and half of the growth in GDP that grew by 32,4%. These welfare trends are driven by consumption growth, the shadow economy and income inequality. The welfare gap diverged after the financial crisis when welfare started stagnating. By 2018 the EU-15 had recovered from the financial crisis from a GDP perspective, but not from a welfare view. Since welfare was in 2018 less than 2% lower than the period-maximum, there is no conclusive evidence in favor of the threshold hypothesis at the EU-15-level. However, the fact that welfare levels in nine countries are more than 5% lower than their peak signals a clear threshold for these countries. Yet, welfare can increase beyond previous peaks with postgrowth policies focusing on social and ecological welfare