A Reassessment of the Relationship Between GDP and Life Satisfaction
AbstractDetermining the relation between life satisfaction and aggregate income at country level has been problematic, because cross-country and times-series analysis generally give different conclusions. Here we analyze this relation without imposing any polynomial structure to the estimated model and eliminating potentially confounding country-specific factors. We show the existence of a bliss point in the interval between 26,000$ and 30,000$ (2005 in PPP) in relationship between individual life satisfaction and GDP. An almost identical result is found when the relationship between aggregate income of Western European regions and life satisfaction of their residents is analyzed: in this case, data suggest a bliss point between 30,000$ and 33,000$. In both samples, we nd rst evidence of a decreasing level of life satisfaction after the bliss points. Therefore, the analysis overall shows the existence of a hump-shaped pattern between GDP and life satisfaction. We discuss possible explanations of the hump shaped pattern linked to external effects of the aggregate income on life satisfaction due, for example, to habit formation and income comparison and present an econometric test of this potential explanation based on some recent findings of the ve-factor personality theory.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Competitive Advantage in the Global Economy (CAGE) in its series CAGE Online Working Paper Series with number 93.
Date of creation: 2012
Date of revision:
Contact details of provider:
Postal: CV4 7AL COVENTRY
Phone: +44 (0) 2476 523202
Fax: +44 (0) 2476 523032
Web page: http://www2.warwick.ac.uk/fac/soc/economics/research/centres/cage/
More information through EDIRC
Life Satisfaction; GDP; Income; Personality;
You can help add them by filling out this form.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jane Snape).
If references are entirely missing, you can add them using this form.