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The Conflictive Relationship between Satisfaction and Income

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Author Info
Eduardo Lora ()
Juan Camilo Chaparro

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Abstract

This paper makes use of the 2006 Gallup World Survey, which includes opinions on satisfaction with various aspects of life in 130 countries. Although a very solid relationship is found between satisfaction and income (both across and within countries), raising doubts regarding the well-known Easterlin Paradox, a new paradox arises: “unhappy growth,” where 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. In particular, it suggests a simple mechanism for explaining various characteristic traits of economic and social populism.

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Paper provided by Inter-American Development Bank, Research Department in its series RES Working Papers with number 4599.

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Date of creation: Nov 2008
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Handle: RePEc:idb:wpaper:4599

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Find related papers by JEL classification:
D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
I31 - Health, Education, and Welfare - - Welfare and Poverty - - - General Welfare
O21 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Planning Models; Planning Policy

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  5. Bruno S. Frey & Matthias Benz & Alois Stutzer, 2003. "Introducing Procedural Utility: Not only What, but also How Matters," CREMA Working Paper Series 2003-02, Center for Research in Economics, Management and the Arts (CREMA). [Downloadable!]
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  6. 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. [Downloadable!]
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  7. Claudia Senik, 2004. "Relativizing relative income," DELTA Working Papers 2004-17, DELTA (Ecole normale supérieure). [Downloadable!]
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  9. 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. [Downloadable!] (restricted)
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  11. Erzo F.P. Luttmer, 2004. "Neighbors as Negatives: Relative Earnings and Well-Being," NBER Working Papers 10667, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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