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The Happiness-Income Paradox Revisited

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Author Info

  • Easterlin, Richard A.

    ()
    (University of Southern California)

  • Angelescu McVey, Laura

    ()
    (University of Southern California)

  • Switek, Malgorzata

    ()
    (Cornerstone Research)

  • Sawangfa, Onnicha

    ()
    (University of Southern California)

  • Zweig, Jacqueline Smith

    (University of Southern California)

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    Abstract

    The striking thing about the happiness-income paradox is that over the long-term – usually a period of 10 y or more – happiness does not increase as a country's income rises. Heretofore the evidence for this was limited to developed countries. This article presents evidence that the long term nil relationship between happiness and income holds also for a number of developing countries, the eastern European countries transitioning from socialism to capitalism, and an even wider sample of developed countries than previously studied. It also finds that in the short-term in all three groups of countries, happiness and income go together, i.e., happiness tends to fall in economic contractions and rise in expansions. Recent critiques of the paradox, claiming the time series relationship between happiness and income is positive, are the result either of a statistical artifact or a confusion of the short-term relationship with the long-term one.

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    Bibliographic Info

    Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5799.

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    Length: 24 pages
    Date of creation: Jun 2011
    Date of revision:
    Publication status: published in: Proceedings of the National Academy of Sciences, 2010, 107 (52), 22463-22468
    Handle: RePEc:iza:izadps:dp5799

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    Related research

    Keywords: Easterlin Paradox; life satisfaction; subjective well-being;

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    References

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    1. Sergei Guriev & Ekaterina Zhuravskaya, 2009. "(Un)happiness in Transition," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 23(2), pages 143-68, Spring.
    2. 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, Economic Studies Program, The Brookings Institution, vol. 39(1 (Spring), pages 1-102.
    3. DiTella, Rafael & MacCulloch, Robert & Oswald, Andrew J., 2001. "Preferences over inflation and unemployment: Evidence from surveys of happiness," ZEI Working Papers, ZEI - Center for European Integration Studies, University of Bonn B 03-2001, ZEI - Center for European Integration Studies, University of Bonn.
    4. Oswald, Andrew J, 1997. "Happiness and Economic Performance," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 107(445), pages 1815-31, November.
    5. KennethJ. Arrow & ParthaS. Dasgupta, 2009. "Conspicuous Consumption, Inconspicuous Leisure," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 119(541), pages F497-F516, November.
    6. Bruno S. Frey & Alois Stutzer, . "What can Economists Learn from Happiness Research?," IEW - Working Papers, Institute for Empirical Research in Economics - University of Zurich 080, Institute for Empirical Research in Economics - University of Zurich.
    7. Easterlin, Richard A., 1995. "Will raising the incomes of all increase the happiness of all?," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 27(1), pages 35-47, June.
    8. Richard Easterlin, 2005. "Diminishing Marginal Utility of Income? Caveat Emptor," Social Indicators Research, Springer, Springer, vol. 70(3), pages 243-255, 02.
    9. Easterlin, Richard A., 2009. "Lost in transition: Life satisfaction on the road to capitalism," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 71(2), pages 130-145, August.
    10. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2008. "Relative Income, Happiness, and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 46(1), pages 95-144, March.
    11. repec:pri:cheawb:deaton_income_health_and_wellbeing_around_the_world_evidence_%20from_gallup_world_poll_jep_spring2008 is not listed on IDEAS
    12. Michael Hagerty & Ruut Veenhoven, 2003. "Wealth and Happiness Revisited – Growing National Income Does Go with Greater Happiness," Social Indicators Research, Springer, Springer, vol. 64(1), pages 1-27, October.
    13. Angus Deaton, 2008. "Income, Health, and Well-Being around the World: Evidence from the Gallup World Poll," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 22(2), pages 53-72, Spring.
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    Cited by:
    1. Roberson Édouard & Gérard Duhaime, 2013. "The Well-Being of the Canadian Arctic Inuit: The Relevant Weight of Economy in the Happiness Equations," Social Indicators Research, Springer, Springer, vol. 113(1), pages 373-392, August.
    2. Pablo Gluzmann, 2013. "Bienestar subjetivo y crecimiento económico: analizando la paradoja del crecimiento infeliz en la Encuesta Mundial Gallup," CEDLAS, Working Papers, CEDLAS, Universidad Nacional de La Plata 0152, CEDLAS, Universidad Nacional de La Plata.
    3. Veenhoven, Ruut & Vergunst, Floris, 2013. "The Easterlin illusion: economic growth does go with greater happiness," MPRA Paper, University Library of Munich, Germany 43983, University Library of Munich, Germany.

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