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The Conflictive Relationship between Satisfaction and Income

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  • Eduardo Lora
  • Juan Camilo Chaparro

Abstract

Using the 2006 Gallup World Survey of life satisfaction in 130 countries, this paper finds a very solid relationship between satisfaction and income (both across and within countries) and uncovers the unhappy growth paradox, whereby faster growth rates are accompanied by lower levels of satisfaction. The losses of satisfaction associated with growth are more pronounced in the material domains of life and are greater in richer and more urban societies. At the individual level, although higher incomes tend to be reflected in greater satisfaction, an increase in the income of the social group to which an individual belongs has the opposite effect. The conflictive relationship between satisfaction and income has implications for political economy and may help explain various characteristics of economic and social populism.

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Bibliographic Info

Paper provided by Inter-American Development Bank in its series IDB Publications with number 6752.

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Date of creation: Nov 2008
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Handle: RePEc:idb:brikps:6752

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Keywords: Labor Policy; WP-642;

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  1. Christopher J. Ruhm, 1996. "Are Recessions Good For Your Health?," NBER Working Papers 5570, National Bureau of Economic Research, Inc.
  2. Eduardo Lora & Ugo Panizza, 2002. "Structural Reforms in Latin America under Scrutiny," Research Department Publications 4303, Inter-American Development Bank, Research Department.
  3. Alpizar, Francisco & Carlsson, Fredrik & Johansson-Stenman, Olof, 2001. "How Much Do We Care About Absolute Versus Relative Income and Consumption?," Working Papers in Economics 63, University of Gothenburg, Department of Economics.
  4. Stevenson, Betsey & Wolfers, Justin, 2008. "Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox," IZA Discussion Papers 3654, Institute for the Study of Labor (IZA).
  5. Di Tella, Rafael & MacCulloch, Robert J. & Oswald, Andrew J., 2001. "The Macroeconomics of Happiness," The Warwick Economics Research Paper Series (TWERPS) 615, University of Warwick, Department of Economics.
  6. Geeta Kingdon & John Knight, 2004. "Community, Comparisons and Subjective Well-being in a Divided Society," Economics Series Working Papers WPS/2004-21, University of Oxford, Department of Economics.
  7. Erzo F. P. Luttmer, 2005. "Neighbors as Negatives: Relative Earnings and Well-Being," The Quarterly Journal of Economics, MIT Press, vol. 120(3), pages 963-1002, August.
  8. Carlsson, Fredrik & Gupta, Gautam & Johansson-Stenman, Olof, 2005. "Keeping Up with the Vaishyas: Caste and Relative Standing," Working Papers in Economics 171, University of Gothenburg, Department of Economics.
  9. Ed Diener & Ed Sandvik & Larry Seidlitz & Marissa Diener, 1993. "The relationship between income and subjective well-being: Relative or absolute?," Social Indicators Research, Springer, vol. 28(3), pages 195-223, March.
  10. Ferrer-i-Carbonell, Ada, 2005. "Income and well-being: an empirical analysis of the comparison income effect," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 997-1019, June.
  11. Stutzer, Alois, 2004. "The role of income aspirations in individual happiness," Journal of Economic Behavior & Organization, Elsevier, vol. 54(1), pages 89-109, May.
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Cited by:
  1. Jan Ott, 2011. "Limited Experienced Happiness or Unlimited Expected Utility, What About the Differences?," Journal of Happiness Studies, Springer, vol. 12(3), pages 519-524, June.
  2. 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.

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