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Gross national happiness as an answer to the Easterlin Paradox?

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Author Info
Di Tella, Rafael
MacCulloch, Robert

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Abstract

The Easterlin Paradox refers to the fact that happiness data are typically stationary in spite of considerable increases in income. This amounts to a rejection of the hypothesis that current income is the only argument in the utility function. We find that the happiness responses of around 350,000 people living in the OECD between 1975 and 1997 are positively correlated with the level of income, the welfare state and (weakly) with life expectancy; they are negatively correlated with the average number of hours worked, environmental degradation (measured by SOx emissions), crime, openness to trade, inflation and unemployment; all controlling for country and year dummies. These effects separate across groups in a pattern that appears broadly plausible (e.g., the rich suffer environmental degradation more than the poor). Based on actual changes from 1975 to 1997, small contributions to happiness can be attributed to the increase in income in our sample. Interestingly, the actual changes in several of the [`]omitted variables' such as life expectancy, hours worked, inflation and unemployment also contribute to happiness over this time period since life expectancy has risen and the others have, on average, fallen. Consequently the unexplained trend in happiness is even bigger than would be predicted if income was the only argument in the utility function. In other words, introducing omitted variables worsens the income-without-happiness paradox.

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Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 86 (2008)
Issue (Month): 1 (April)
Pages: 22-42
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Handle: RePEc:eee:deveco:v:86:y:2008:i:1:p:22-42

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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Stefano Bartolini & Ennio Bilancini & Maurizio Pugno, 2008. "Did the Decline in Social Capital Depress Americans’ Happiness?," Department of Economics University of Siena 540, Department of Economics, University of Siena. [Downloadable!]
  2. Hooi Hooi Lean & Russell Smyth, 2009. "Co2 Emissions, Electricity Consumption And Output In Asean," Development Research Unit Working Paper Series 13-09, Monash University, Department of Economics. [Downloadable!]
  3. Easterlin, Richard A. & Angelescu, Laura, 2009. "Happiness and Growth the World Over: Time Series Evidence on the Happiness-Income Paradox," IZA Discussion Papers 4060, Institute for the Study of Labor (IZA). [Downloadable!]
  4. André van Hoorn & Robbert Maseland, 2008. "Weber, Work Ethic And Well-Being," Papers on Economics of Religion 08/07, Department of Economic Theory and Economic History of the University of Granada.. [Downloadable!]
  5. Russell Smyth & Ingrid Nielsen & Qingguo Zhai & Tiemin Liu & Yin Liu & C.Y. Tang & Zhihong Wang & Zuxiang Wang & Juyong Zhang, 2008. "Environmental Surroundings And Personal Well-Being In Urban China," Monash Economics Working Papers 32/08, Monash University, Department of Economics. [Downloadable!]
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  6. Enrico A. Macelli & Richard A. Easterlin, . "Beyond Gender Differences in U.S. Life Cycle Happiness," Working Papers 2, University of Massachusetts Boston, Economics Department. [Downloadable!]
  7. Georgios Kavetsos & Stefan Szymanski, 2008. "National Wellbeing and International Sports Events," Working Papers 0804, International Association of Sports Economists. [Downloadable!]
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