Money Doesn’t Buy Happiness… Or Does It? A Reconsideration Based on the Combined Effects of Wealth, Income and Consumption
AbstractThe accepted view among psychologists and economists alike is that economic well-being has a statistically significant but only weak effect on happiness/subjective well-being (SWB). This view is based almost entirely on weak relationships with household income. The paper uses household economic panel data from five countries – Australia, Britain, Germany, Hungary and the Netherlands – to provide a reconsideration of the impact of economic wellbeing on happiness. The main conclusion is that happiness is considerably more affected by economic circumstances than previously believed. In all five countries wealth affects life satisfaction more than income. In the countries for which consumption data are available (Britain and Hungary), non-durable consumption expenditures also prove at least as important to happiness as income. Further, results from panel regression fixed effects models indicate that changes in wealth, income and consumption all produce significant, though not large, changes in satisfaction levels.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1218.
Length: 32 pages
Date of creation: Jul 2004
Date of revision:
Publication status: published in: Social Indicators Research, 2008, 87(1), 65-82
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Other versions of this item:
- Bruce Headey & Ruud Muffels & Mark Wooden, 2004. "Money Doesn't Buy Happiness … or Does It? A Reconsideration Based on the Combined Effects of Wealth, Income and Consumption," Melbourne Institute Working Paper Series wp2004n15, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
- D19 - Microeconomics - - Household Behavior - - - Other
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-08-09 (All new papers)
- NEP-CBE-2004-08-09 (Cognitive & Behavioural Economics)
- NEP-LTV-2004-08-09 (Unemployment, Inequality & Poverty)
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