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Subjective Well-Being and Income: Is There Any Evidence of Satiation?*

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  • Betsey Stevenson
  • Justin Wolfers

Abstract

Many scholars have argued that once "basic needs" have been met, further rises in income are not associated with further increases in subjective well-being. We assess the validity of this claim in comparisons of both rich and poor countries, and also of rich and poor people within a country. Analyzing multiple datasets, multiple definitions of "basic needs" and multiple questions about well-being, we find no support for this claim. The relationship between well-being and income is roughly log-linear and does not diminish as incomes rise. If there is a satiation point, we are yet to reach it.

Suggested Citation

  • Betsey Stevenson & Justin Wolfers, 2013. "Subjective Well-Being and Income: Is There Any Evidence of Satiation?," American Economic Review, American Economic Association, vol. 103(3), pages 598-604, May.
  • Handle: RePEc:aea:aecrev:v:103:y:2013:i:3:p:598-604
    Note: DOI: 10.1257/aer.103.3.598
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    References listed on IDEAS

    as
    1. Oswald, Andrew J., 2008. "On the curvature of the reporting function from objective reality to subjective feelings," Economics Letters, Elsevier, vol. 100(3), pages 369-372, September.
    2. Angus Deaton, 2008. "Income, Health, and Well-Being around the World: Evidence from the Gallup World Poll," Journal of Economic Perspectives, American Economic Association, vol. 22(2), pages 53-72, Spring.
    3. Easterlin, Richard A. & Sawangfa, Onnicha, 2009. "Happiness and Economic Growth: Does the Cross Section Predict Time Trends? Evidence from Developing Countries," IZA Discussion Papers 4000, Institute of Labor Economics (IZA).
    4. 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, vol. 46(1), pages 95-144, March.
    5. Bruno S. Frey & Alois Stutzer, 2002. "What Can Economists Learn from Happiness Research?," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 402-435, June.
    6. Sacks, Daniel W. & Stevenson, Betsey & Wolfers, Justin, 2012. "The New Stylized Facts about Income and Subjective Well-Being," IZA Discussion Papers 7105, Institute of Labor Economics (IZA).
    7. Easterlin, Richard A., 1974. "Does Economic Growth Improve the Human Lot? Some Empirical Evidence," MPRA Paper 111773, University Library of Munich, Germany.
    8. repec:pri:cheawb:deaton_income_health_and_wellbeing_around_the_world_evidence_%20from_gall is not listed on IDEAS
    9. Rafael Di Tella & Robert MacCulloch, 2008. "Happiness Adaptation to Income beyond "Basic Needs"," NBER Working Papers 14539, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

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    Replication

    This item has been replicated by:
  • Donald Lien & Yue Hu & Long Liu, 2017. "Subjective Well‐Being and Income: A Re‐Examination of Satiation Using the Regression Kink Model With an Unknown Threshold," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 32(2), pages 463-469, March.
  • More about this item

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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    This item is featured on the following reading lists, Wikipedia, or ReplicationWiki pages:
    1. Subjective Well-Being and Income: Is There Any Evidence of Satiation? (AER 2013) in ReplicationWiki

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