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Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox

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Author Info
Betsey Stevenson ()
Justin Wolfers ()

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Abstract

The “Easterlin paradox” suggests that there is no link between a society’s economic development and its average level of happiness. We re-assess this paradox analyzing multiple rich datasets spanning many decades. Using recent data on a broader array of countries, we establish a clear positive link between average levels of subjective well-being and GDP per capita across countries, and find no evidence of a satiation point beyond which wealthier countries have no further increases in subjective well-being. We show that the estimated relationship is consistent across many datasets and is similar to the relationship between subject well-being and income observed within countries. Finally, examining the relationship between changes in subjective well-being and income over time within countries we find economic growth associated with rising happiness. Together these findings indicate a clear role for absolute income and a more limited role for relative income comparisons in determining happiness.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 2394.

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Date of creation: 2008
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Handle: RePEc:ces:ceswps:_2394

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Related research
Keywords: happiness; subjective well-being; Easterlin Paradox; life satisfaction; economic growth; well-being-income gradient; hedonic treadmill;

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Find related papers by JEL classification:
D60 - Microeconomics - - Welfare Economics - - - General
I30 - Health, Education, and Welfare - - Welfare and Poverty - - - General
J10 - Labor and Demographic Economics - - Demographic Economics - - - General

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  1. Eduardo Lora & Juan Camilo Chaparro, 2008. "The Conflictive Relationship between Satisfaction and Income," RES Working Papers 4599, Inter-American Development Bank, Research Department. [Downloadable!]
  2. Guriev, Sergei & Zhuravskaya, Ekaterina, 2009. "(Un)Happiness in Transition," CEPR Discussion Papers 7258, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. Andrew E. Clark, 2008. "Happiness, habits and high rank: Comparisons in economic and social life," PSE Working Papers 2008-61, PSE (Ecole normale supérieure). [Downloadable!]
  4. Peter Kuhn & Peter Kooreman & Adriaan R. Soetevent & Arie Kapteyn, 2008. "The Own and Social Effects of an Unexpected Income Shock," Tinbergen Institute Discussion Papers 08-048/1, Tinbergen Institute. [Downloadable!]
  5. Richard Layard & Guy Mayraz & Stephen Nickell, 2009. "Does Relative Income Matter? Are the Critics Right?," CEP Discussion Papers dp0918, Centre for Economic Performance, LSE. [Downloadable!]
    Other versions:
  6. Martin Binder & Alex Coad, 2009. "An Examination of the Dynamics of Happiness Using Vector Autoregressions," Papers on Economics and Evolution 2009-04, Max Planck Institute of Economics, Evolutionary Economics Group. [Downloadable!]
  7. Pavel Luengas & Inder J. Ruprah, 2009. "Should Central Banks Target Happiness? Evidence from Latin America," OVE Working Papers 0209, Inter-American Development Bank, Office of Evaluation and Oversight (OVE). [Downloadable!]
  8. John F. Helliwell & Christopher P. Barrington-Leigh & Anthony Harris & Haifang Huang, 2009. "International Evidence on the Social Context of Well-Being," NBER Working Papers 14720, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Francisco Alvarez-Cuadrado & Ngo Van Long, 2008. "The Relative Income Hypothesis," CIRANO Working Papers 2008s-18, CIRANO. [Downloadable!]
  10. Néstor Gándelman & Rubén Hernández-Murillo, 2009. "The impact of inflation and unemployment on subjective personal and country evaluations," Review, Federal Reserve Bank of St. Louis, issue May, pages 107-126. [Downloadable!]
  11. Francisco Alvarez-Cuadrado & Ngo Van Long, 2008. "A Permanent Income Version of the Relative Income Hypothesis," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  12. Peter Kuhn & Peter Kooreman & Adriaan R. Stoetevent & Arie Kapteyn, 2008. "The Own and Social Effects of an Unexpected Income Shock: Evidence from the Dutch Postcode Lottery," Working Papers 574, RAND Corporation Publications Department. [Downloadable!]
    Other versions:
  13. Rafael Di Tella & Robert MacCulloch, 2008. "Happiness Adaptation to Income beyond "Basic Needs"," NBER Working Papers 14539, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. Arie Kapteyn & James P. Smith & Arthur van Soest, 2008. "Comparing Life Satisfaction," Working Papers 623, RAND Corporation Publications Department. [Downloadable!]
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