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Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox

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Author Info
Stevenson, Betsey () (Wharton School, University of Pennsylvania)
Wolfers, Justin () (Wharton School, University of Pennsylvania)

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Abstract

The “Easterlin paradox” suggests that there is no link between a society’s economic development and its average level of happiness. We re-assess this paradox analyzing multiple rich datasets spanning many decades. Using recent data on a broader array of countries, we establish a clear positive link between average levels of subjective well-being and GDP per capita across countries, and find no evidence of a satiation point beyond which wealthier countries have no further increases in subjective well-being. We show that the estimated relationship is consistent across many datasets and is similar to the relationship between subject well-being and income observed within countries. Finally, examining the relationship between changes in subjective well-being and income over time within countries we find economic growth associated with rising happiness. Together these findings indicate a clear role for absolute income and a more limited role for relative income comparisons in determining happiness.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3654.

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Length: 80 pages
Date of creation: Aug 2008
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Handle: RePEc:iza:izadps:dp3654

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Related research
Keywords: happiness; subjective well-being; Easterlin Paradox; life satisfaction; economic growth; well-being-income gradient; hedonic treadmill;

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Find related papers by JEL classification:
D6 - Microeconomics - - Welfare Economics
I3 - Health, Education, and Welfare - - Welfare and Poverty
J1 - Labor and Demographic Economics - - Demographic Economics

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  1. Andrew E. Clark, 2008. "Happiness, habits and high rank: Comparisons in economic and social life," PSE Working Papers 2008-61, PSE (Ecole normale supérieure). [Downloadable!]
  2. John F. Helliwell & Christopher P. Barrington-Leigh & Anthony Harris & Haifang Huang, 2009. "International Evidence on the Social Context of Well-Being," NBER Working Papers 14720, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Francisco Alvarez-Cuadrado & Ngo Van Long, 2008. "The Relative Income Hypothesis," CIRANO Working Papers 2008s-18, CIRANO. [Downloadable!]
  4. Rafael Di Tella & Robert MacCulloch, 2008. "Happiness Adaptation to Income beyond "Basic Needs"," NBER Working Papers 14539, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Arie Kapteyn & James P. Smith & Arthur van Soest, 2008. "Comparing Life Satisfaction," Working Papers 623, RAND Corporation Publications Department. [Downloadable!]
  6. Eduardo Lora & Juan Camilo Chaparro, 2008. "The Conflictive Relationship between Satisfaction and Income," RES Working Papers 4599, Inter-American Development Bank, Research Department. [Downloadable!]
  7. Francisco Alvarez-Cuadrado & Ngo Van Long, 2008. "A Permanent Income Version of the Relative Income Hypothesis," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  8. Leonardo Becchetti & Elena Giachin Ricca & Alessandra Pelloni, 2009. "The 60s Turnaround as a Test on the Causal Relationship between Sociability and Happiness," SOEPpapers 209, DIW Berlin, The German Socio-Economic Panel (SOEP). [Downloadable!]
    Other versions:
  9. Peter Kuhn & Peter Kooreman & Adriaan R. Stoetevent & Arie Kapteyn, 2008. "The Own and Social Effects of an Unexpected Income Shock: Evidence from the Dutch Postcode Lottery," Working Papers 574, RAND Corporation Publications Department. [Downloadable!]
    Other versions:
  10. Easterlin, Richard A. & Angelescu, Laura, 2009. "Happiness and Growth the World Over: Time Series Evidence on the Happiness-Income Paradox," IZA Discussion Papers 4060, Institute for the Study of Labor (IZA). [Downloadable!]
  11. Kapteyn, Arie & Smith, James P. & van Soest, Arthur, 2009. "Life Satisfaction," IZA Discussion Papers 4015, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
    • Arie Kapteyn & James P. Smith & Arthur Van Soest, 2009. "Life Satisfaction," Working Papers 623-1, RAND Corporation Publications Department. [Downloadable!]
  12. Angus Deaton & Jane Fortson & Robert Tortora, 2009. "Life (evaluation), HIV/AIDS, and Death in Africa," NBER Working Papers 14637, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  13. Guriev, Sergei & Zhuravskaya, Ekaterina, 2009. "(Un)Happiness in Transition," CEPR Discussion Papers 7258, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  14. Talya Miron-Shatz, 2009. ""Am I going to be happy and financially stable?": How American women feel when they think about financial security," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 4(1), pages 102-112, February. [Downloadable!]
  15. Richard Layard & Guy Mayraz & Stephen Nickell, 2009. "Does Relative Income Matter?: Are the Critics Right?," SOEPpapers 210, DIW Berlin, The German Socio-Economic Panel (SOEP). [Downloadable!]
    Other versions:
  16. Michael Ehrmann & Panagiota Tzamourani, 2009. "Memories of high inflation," Working Paper Series 1095, European Central Bank. [Downloadable!]
  17. Pavel Luengas & Inder J. Ruprah, 2009. "Should Central Banks Target Happiness? Evidence from Latin America," OVE Working Papers 0209, Inter-American Development Bank, Office of Evaluation and Oversight (OVE). [Downloadable!]
  18. Peter Kuhn & Peter Kooreman & Adriaan R. Soetevent & Arie Kapteyn, 2008. "The Own and Social Effects of an Unexpected Income Shock," Tinbergen Institute Discussion Papers 08-048/1, Tinbergen Institute. [Downloadable!]
  19. Martin Binder & Alex Coad, 2009. "An Examination of the Dynamics of Happiness Using Vector Autoregressions," Papers on Economics and Evolution 2009-04, Max Planck Institute of Economics, Evolutionary Economics Group. [Downloadable!]
  20. Néstor Gándelman & Rubén Hernández-Murillo, 2009. "The impact of inflation and unemployment on subjective personal and country evaluations," Review, Federal Reserve Bank of St. Louis, issue May, pages 107-126. [Downloadable!]
  21. Arik Levinson, 2009. "Valuing Public Goods Using Happiness Data: The Case of Air Quality," Working Papers gueconwpa~09-09-03, Georgetown University, Department of Economics. [Downloadable!]
    Other versions:
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