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The Conflictive Relationship between Satisfaction and Income

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  • Eduardo Lora

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  • Juan Camilo Chaparro

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 Research Department Publications 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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  1. Eduardo Lora & Ugo Panizza, 2002. "Structural Reforms in Latin America under Scrutiny," Research Department Publications, Inter-American Development Bank, Research Department 4303, Inter-American Development Bank, Research Department.
  2. Luttmer, Erzo F. P., 2004. "Neighbors as Negatives: Relative Earnings and Well-Being," Working Paper Series rwp04-029, Harvard University, John F. Kennedy School of Government.
  3. Betsey Stevenson & Justin Wolfers, 2008. "Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(1 (Spring), pages 1-102.
  4. Ed Diener & Ed Sandvik & Larry Seidlitz & Marissa Diener, 1993. "The relationship between income and subjective well-being: Relative or absolute?," Social Indicators Research, Springer, Springer, vol. 28(3), pages 195-223, March.
  5. Geeta Kingdon & John Knight, 2005. "Community, Comparisons and Subjective Well-being in a Divided Society," Working Papers, University of Cape Town, Development Policy Research Unit 05095, University of Cape Town, Development Policy Research Unit.
  6. DiTella, Rafael & MacCulloch, Robert & Oswald, Andrew J., 1999. "The macroeconomics of happiness," ZEI Working Papers B 03-1999, ZEI - Center for European Integration Studies, University of Bonn.
  7. Christopher J. Ruhm, 1996. "Are Recessions Good For Your Health?," NBER Working Papers 5570, National Bureau of Economic Research, Inc.
  8. 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.
  9. Stutzer, Alois, 2004. "The role of income aspirations in individual happiness," Journal of Economic Behavior & Organization, Elsevier, vol. 54(1), pages 89-109, May.
  10. 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.
  11. 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.
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Cited by:
  1. 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.
  2. Jan Ott, 2011. "Limited Experienced Happiness or Unlimited Expected Utility, What About the Differences?," Journal of Happiness Studies, Springer, Springer, vol. 12(3), pages 519-524, June.

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