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The New Stylized Facts about Income and Subjective Well-Being

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  • Daniel W. Sacks
  • Betsey Stevenson
  • Justin Wolfers

Abstract

In recent decades economists have turned their attention to data that asks people how happy or satisfied they are with their lives. Much of the early research concluded that the role of income in determining well-being was limited, and that only income relative to others was related to well-being. In this paper, we review the evidence to assess the importance of absolute and relative income in determining well-being. Our research suggests that absolute income plays a major role in determining well-being and that national comparisons offer little evidence to support theories of relative income. We find that well-being rises with income, whether we compare people in a single country and year, whether we look across countries, or whether we look at economic growth for a given country. Through these comparisons we show that richer people report higher well-being than poorer people; that people in richer countries, on average, experience greater well-being than people in poorer countries; and that economic growth and growth in well-being are clearly related. Moreover, the data show no evidence for a satiation point above which income and well-being are no longer related.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4067.

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Date of creation: 2013
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Handle: RePEc:ces:ceswps:_4067

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Related research

Keywords: subjective well-being; life satisfaction; quality of life; Easterlin Paradox; adaptation;

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References

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  1. Easterlin, Richard A., 1995. "Will raising the incomes of all increase the happiness of all?," Journal of Economic Behavior & Organization, Elsevier, vol. 27(1), pages 35-47, June.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Links and Notes from April 17th Whitaker Institute Talk on Well-Being
    by Liam Delaney in Economics and Psychology Research on 2013-05-03 19:32:00
  2. The New Stylized Facts About Income and Subjective Well-Being
    by maximorossi in NEP-LTV blog on 2013-03-04 12:45:56
  3. The New Stylized Facts about Income and Subjective Well-Being
    by maximorossi in NEP-LTV blog on 2013-02-27 12:59:25
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Cited by:
  1. Bodo Knoll & Hans Pitlik & Martin Rode, 2013. "Economic Freedom, Money and Happiness – Why Deregulation Matters Beyond its Wealth Enhancing Effect," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 11(2), pages 35-42, 07.
  2. James Fenske & Achyuta Adhvaryu & Anant Nyshadham, 2014. "Early Life Circumstance and Adult Mental Health," Economics Series Working Papers 698, University of Oxford, Department of Economics.
  3. Beja Jr., Edsel, 2013. "Does economic prosperity bring about a happier society? Empirical remarks on the Easterlin Paradox debate sans Happiness Adaptation," MPRA Paper 50633, University Library of Munich, Germany.
  4. Pfaff, Tobias & Hirata, Johannes, 2013. "Testing the Easterlin hypothesis with panel data: The dynamic relationship between life satisfaction and economic growth in Germany and in the UK," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79965, Verein für Socialpolitik / German Economic Association.
  5. Beja Jr, Edsel, 2013. "Does economic prosperity bring about a happier society? Mathematical remarks on the Easterlin Paradox debate," MPRA Paper 48229, University Library of Munich, Germany.
  6. Beja Jr., Edsel, 2013. "Does economic prosperity bring about a happier society? Empirical remarks on the Easterlin Paradox debate," MPRA Paper 49446, University Library of Munich, Germany.
  7. Pfaff, Tobias & Hirata, Johannes, 2013. "Testing the Easterlin hypothesis with panel data: The dynamic relationship between life satisfaction and economic growth in Germany and in the UK," CIW Discussion Papers 4/2013, University of Münster, Center for Interdisciplinary Economics (CIW).
  8. Tobias Pfaff & Johannes Hirata, 2013. "Testing the Easterlin Hypothesis with Panel Data: The Dynamic Relationship between Life Satisfaction and Economic Growth in Germany and the UK," SOEPpapers on Multidisciplinary Panel Data Research 554, DIW Berlin, The German Socio-Economic Panel (SOEP).
  9. Pablo Gluzmann, 2013. "Bienestar subjetivo y crecimiento económico: analizando la paradoja del crecimiento infeliz en la Encuesta Mundial Gallup," Económica, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata, vol. 59, pages 231-258, January-D.

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