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Relative Income, Subjective Wellbeing and the Easterlin Paradox: Intra- and Inter-national Comparisons

In: The Economics of Happiness

Author

Listed:
  • Arthur Grimes

    (Victoria University of Wellington
    Motu Research)

  • Marc Reinhardt

    (University of Bologna)

Abstract

We extend the Easterlin Paradox (EP) literature in two key respects. First, we test whether income comparisons matter for subjective wellbeing both when own incomes are compared with others within the country (intra-national) and with incomes across countries (inter-national). Second, we test whether these effects differ by settlement-type (rural through to large cities) and by country-type (developed and transitional). We confirm the intra-national EP prediction that subjective wellbeing is unchanged by an equi-proportionate rise in intra-country incomes across all developed country settlement-types. This is also the case for rural areas in transitional countries but not for larger settlements in those countries. Inter-national income comparisons are important for people’s subjective wellbeing across all country-settlement-types. Policy-makers must therefore consider their citizens’ incomes in an international context and cannot restrict attention solely to the intra-national income distribution.

Suggested Citation

  • Arthur Grimes & Marc Reinhardt, 2019. "Relative Income, Subjective Wellbeing and the Easterlin Paradox: Intra- and Inter-national Comparisons," Springer Books, in: Mariano Rojas (ed.), The Economics of Happiness, chapter 0, pages 85-105, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-15835-4_4
    DOI: 10.1007/978-3-030-15835-4_4
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