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Would You Be Happier If You Were Richer? A Focusing Illusion

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Author Info
Daniel Kahneman (Princeton University)
Alan B. Krueger (Princeton University and NBER)
David Schkade (University of California, San Diego)
Norbert Schwarz (University of Michigan)
Arthur A. Stone (Stony Brook University)

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Abstract

Most people believe that they would be happier if they were richer, but survey evidence on subjective well-being is largely inconsistent with that belief. Subjective well-being is most commonly measured by questions that ask people, “All things considered, how satisfied are you with your life as a whole these days?” or “Taken all together, would you say that you are very happy, pretty happy, or not too happy?” Such questions elicit a global evaluation of one’s life. An alternative method asks people to report their feelings in real time, which yields a measure of experienced happiness. Surveys in many countries conducted over decades indicate that, on average, reported global judgments of life satisfaction or happiness have not changed much over the last four decades, in spite of large increases in real income per capita. While reported life satisfaction and household income are positively correlated in a cross-section of people at a given time, increases in income have been found to have mainly a transitory effect on individuals’ reported life satisfaction. (1-3) Moreover, the correlation between income and subjective well-being is weaker when a measure of experienced happiness is used instead of a global measure. This article reviews recent evidence that helps interpret these observations.

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Paper provided by Princeton University, Department of Economics, Center for Economic Policy Studies. in its series Working Papers with number 77.

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Date of creation: May 2006
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Handle: RePEc:pri:cepsud:77

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  1. Papers and articles using the American Time Use Survey (ATUS)
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  1. Ulrich Schimmack, 2008. "Measuring Wellbeing in the SOEP," SOEPpapers 145, DIW Berlin, The German Socio-Economic Panel (SOEP). [Downloadable!]
  2. Alejandro Cid & Daniel Ferres & Máximo Rossi, 2008. "Subjective Well-Being in the Southern Cone: Health, Income and Family," Documentos de Trabajo (working papers) 1308, Department of Economics - dECON. [Downloadable!]
  3. Sanghamitra Das & Abhiroop Mukhopadhyay & Tridip Ray, 2007. "Integrating mental health in welfare evaluation: An Empirical application," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 07-06, Indian Statistical Institute, New Delhi, India. [Downloadable!]
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  4. Andreas Knabe & Steffen Rätzel & Ronnie Schöb & Joachim Weimann, 2009. "Dissatisfied with Life, but Having a Good Day: Time-Use and Well-Being of the Unemployed," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  5. Isacsson, Gunnar & Karlström, Anders & Swärdh, Jan-Erik, 2008. "The value of time from subjective data on life satisfaction and job satisfaction: An empirical assessment," Working Papers 2008:2, Swedish National Road & Transport Research Institute (VTI). [Downloadable!]
  6. Barbara Ferrari & Luigi Mittone & Marco Tecilla, 2008. "Retirement Systems, Demography, Happiness and Welfare Redistribution," CEEL Working Papers 0808, Computable and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia. [Downloadable!]
  7. 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!]
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  8. 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!]
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