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Subjective Well-Being: Easterlin Paradox, the (decreasing) Return(s)? From log to square, new evidence from wealthier data

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  • Thomas Roca

    (GED, Université Montesquieu Bordeaux IV)

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    Abstract

    The quest for happiness is neither new for human beings, nor for economists. With the systematization of household surveys, Subjective Well-Being studies have flourished. Discussions now focus on the slope of the virtually unchallenged curvilinear functional form between income and life satisfaction. Indeed, if growth positive returns are not -yet- contested for societies that have difficulties satisfying their population?s basic needs, the correlation between income and Subjective Well-Being in wealthier countries has no consensus; from flat to steep, researchers dither? Benefitting from larger datasets, recent papers have attempted to debunk the Easterlin paradox. They show that self-reported well-being is steadily and positively correlated with income and growth, even in developed countries. However, using the most up-to-date global surveys, calculations cast doubt upon the belief in an eternal sunshine relation between income and ?happiness?. Indeed, we observe that the curvilinear relation between income and happiness could be challenged by the quadratic one. Thus, it now appears difficult to reject the possibility of decreasing returns, to the extent that it might be possible to consider, not only a weak, but a negative correlation between income and happiness for wealthier countries. Nevertheless, this perspective is likely dependent on the sample size. Moreover, we claim no direct causality for the uncovered negative slope. Further investigations would be necessary to prove, inform - or disprove - these new findings. La recherche du bonheur n?est pas une quête nouvelle pour les humains, ni pour les économistes ! Avec la systématisation des enquêtes ménages, les études sur le bien-être subjectif se sont multipliées. Si le caractère curvilinéaire de l?association entre revenu et bien-être subjectif n?est pas, jusqu?ici, remise en question, les débats se sont récemment concentrés sur la pente de celle-ci. En effet, bien que l?impact positif de la croissance sur le bien-être dans les pays en développement ne soit pas contesté, pour les pays industrialisés, la corrélation entre bien-être subjectif et revenu est loin de faire l?objet d?un consensus. Récemment, en utilisant des bases de données de plus en plus larges, certaines recherches ont remis en cause le paradoxe d?Easterlin. D?après ces travaux, il serait désormais clair que le bien-être subjectif soit durablement et positivement corrélé avec le revenu et la croissance, même pour les pays industrialisés. Néanmoins, nos observations réalisées grâce aux plus complètes bases de données actuellement disponibles, montrent que la relation idyllique entre revenu et bien-être subjectif peut être remise en question. La forme curvilinéaire pourrait en effet, cacher une forme quadratique. Il deviendrait alors difficile de rejeter l?existence de gains marginaux décroissants. Néanmoins, il serait imprudent d?établir un lien de causalité pour la partie décroissante de la pente ainsi mise à jour. De nouvelles recherches et des données plus longues seront nécessaires pour alimenter, ou réfuter, nos observations. (Full text in english)

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    Paper provided by Groupe d'Economie du Développement de l'Université Montesquieu Bordeaux IV in its series Documents de travail with number 163.

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    Length: 35 pages
    Date of creation: Feb 2011
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    Handle: RePEc:mon:ceddtr:163

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    1. Di Tella, Rafael & MacCulloch, Robert, 2008. "Gross national happiness as an answer to the Easterlin Paradox?," Journal of Development Economics, Elsevier, vol. 86(1), pages 22-42, April.
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