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Maslow’s Needs Hierarchy and the Effect of Income on Happiness Levels

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  • Drakopoulos, Stavros A.
  • Grimani, Katerina

Abstract

Abraham Maslow’s theory of hierarchical needs has been employed by a large variety of conceptual frameworks. The theory can also offer additional insights to the research field which investigates the relationship between income and reported happiness levels. The incorporation of needs hierarchy into a happiness framework implies that individuals have a priority approach to happiness. This means that the most important needs must be satisfied first before the secondary needs come into the picture. In terms of income-happiness relationship, it suggests that income is very important for happiness up to a certain level of income. For higher income levels this effect becomes much weaker, given that the satisfaction of non-basic needs becomes important. The chapter tests this idea by using the European Foundation European Quality of Life Survey 2007 which contains data from 30 European countries and Turkey. In the proposed model, reported happiness is placed as a dependent variable and income level as an independent variable. The ordered probit model (with robust standard errors) is the main statistical tool of the work. The empirical results indicate that there is a strong positive relationship between income and happiness for low income households group, and a non-significant relationship between income and happiness for high income households group. This result supports the presence of hierarchical behaviour. The model also contains personal variables such as gender, age, marital status, educational level, number of children, working hours per week, country dummy variables and employment status. The relationship of these variables to reported happiness levels is also examined. Finally, there is a comparison of the empirical findings to results in the relevant literature.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 50987.

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Date of creation: Oct 2013
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Handle: RePEc:pra:mprapa:50987

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Keywords: Happiness; Income; Maslow’s Hierarchy of Needs;

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  1. Easterlin, Richard A, 2001. "Income and Happiness: Towards an Unified Theory," Economic Journal, Royal Economic Society, vol. 111(473), pages 465-84, July.
  2. Drakopoulos, Stavros A., 2008. "The Concept Of Comparison Income: An Historical Perspective," MPRA Paper 8713, University Library of Munich, Germany.
  3. Charness, Gary B & Grosskopf, Brit, 2000. "Relative Payoffs And Happiness: An Experimental Study," University of California at Santa Barbara, Economics Working Paper Series qt8389x8z2, Department of Economics, UC Santa Barbara.
  4. Dora Gudmundsdottir, 2013. "The Impact of Economic Crisis on Happiness," Social Indicators Research, Springer, vol. 110(3), pages 1083-1101, February.
  5. Kenny, Charles, 1999. "Does Growth Cause Happiness, or Does Happiness Cause Growth?," Kyklos, Wiley Blackwell, vol. 52(1), pages 3-25.
  6. Max-Neef, Manfred, 1995. "Economic growth and quality of life: a threshold hypothesis," Ecological Economics, Elsevier, vol. 15(2), pages 115-118, November.
  7. Jackson, Tim & Marks, Nic, 1999. "Consumption, sustainable welfare and human needs--with reference to UK expenditure patterns between 1954 and 1994," Ecological Economics, Elsevier, vol. 28(3), pages 421-441, March.
  8. Canova, Luigina & Rattazzi, Anna Maria Manganelli & Webley, Paul, 2005. "The hierarchical structure of saving motives," Journal of Economic Psychology, Elsevier, vol. 26(1), pages 21-34, February.
  9. 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.
  10. Stefano Bartolini & Ennio Bilancini & Maurizio Pugno, 2013. "Did the Decline in Social Connections Depress Americans’ Happiness?," Social Indicators Research, Springer, vol. 110(3), pages 1033-1059, February.
  11. Gerdtham, Ulf-G & Johannesson, Magnus, 1997. "The Relationship between Happiness, Health and Socio-economic Factors: Results Based on Swedish Micro Data," Working Paper Series in Economics and Finance 207, Stockholm School of Economics.
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  13. Drakopoulos, S. A. & Karayiannis, A. D., 2004. "The Historical Development of Hierarchical Behavior in Economic Thought," Journal of the History of Economic Thought, Cambridge University Press, vol. 26(03), pages 363-378, September.
  14. Drakopoulos, S A, 1994. " Hierarchical Choice in Economics," Journal of Economic Surveys, Wiley Blackwell, vol. 8(2), pages 133-53, June.
  15. Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, vol. 104(424), pages 648-59, May.
  16. Cameron, A Colin & Trivedi, Pravin K, 1986. "Econometric Models Based on Count Data: Comparisons and Applications of Some Estimators and Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 1(1), pages 29-53, January.
  17. Stefano Bartolini & Ennio Bilancini & Maurizio Pugno, 2008. "Did the Decline in Social Capital Depress Americans’ Happiness?," Department of Economics University of Siena 540, Department of Economics, University of Siena.
  18. J. Scott Long & Jeremy Freese, 2006. "Regression Models for Categorical Dependent Variables using Stata, 2nd Edition," Stata Press books, StataCorp LP, edition 2, number long2, March.
  19. John F. Helliwell, 2002. "How's Life? Combining Individual and National Variables to Explain Subjective Well-Being," NBER Working Papers 9065, National Bureau of Economic Research, Inc.
  20. Dolan, Paul & Peasgood, Tessa & White, Mathew, 2008. "Do we really know what makes us happy A review of the economic literature on the factors associated with subjective well-being," Journal of Economic Psychology, Elsevier, vol. 29(1), pages 94-122, February.
  21. Diego Fernandez-Duque & Jessica Landers, 2008. "``Feeling more regret than I would have imagined'': Self-report and behavioral evidence," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 3(6), pages 449-456, August.
  22. Drakopoulos, Stavros A., 2005. "The paradox of Happiness: towards an alternative explanation," MPRA Paper 6870, University Library of Munich, Germany.
  23. Des Gasper, 2005. "Subjective and Objective Well-Being in Relation to Economic Inputs: Puzzles and Responses," Review of Social Economy, Taylor & Francis Journals, vol. 63(2), pages 177-206.
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