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Happiness, income and poverty

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  • Andrew E. Clark

    (Paris School of Economics – CNRS)

Abstract

There is considerable evidence from a variety of sources to suggest that well-being is a function of relative income. These findings have been used to explain the Easterlin Paradox, whereby a rise in income for all does not lead to a rise in average happiness in a country (even though the cross section relationship between income and happiness is positive). This relativity of utility has led to calls for policy to focus away from GDP. I here first discuss some of the evidence that well-being is indeed relative in income, but then consider two relatively little-analysed issues to suggest that there may continue to be a role for GDP per capita in happiness-based policy: the inequality of subjective well-being, and the specific case of those in income poverty.

Suggested Citation

  • Andrew E. Clark, 2017. "Happiness, income and poverty," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 64(2), pages 145-158, June.
  • Handle: RePEc:spr:inrvec:v:64:y:2017:i:2:d:10.1007_s12232-017-0274-7
    DOI: 10.1007/s12232-017-0274-7
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    References listed on IDEAS

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    1. AndrewE. Clark & Claudia Senik, 2010. "Who Compares to Whom? The Anatomy of Income Comparisons in Europe," Economic Journal, Royal Economic Society, vol. 120(544), pages 573-594, May.
    2. Andrew E. Clark, 2003. "Unemployment as a Social Norm: Psychological Evidence from Panel Data," Journal of Labor Economics, University of Chicago Press, vol. 21(2), pages 289-322, April.
    3. Felix FitzRoy & Michael Nolan & Max Steinhardt & David Ulph, 2014. "Testing the tunnel effect: comparison, age and happiness in UK and German panels," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-30, December.
    4. David Card & Alexandre Mas & Enrico Moretti & Emmanuel Saez, 2012. "Inequality at Work: The Effect of Peer Salaries on Job Satisfaction," American Economic Review, American Economic Association, vol. 102(6), pages 2981-3003, October.
    5. Andrew E. Clark & Ed Diener & Yannis Georgellis & Richard E. Lucas, 2008. "Lags And Leads in Life Satisfaction: a Test of the Baseline Hypothesis," Economic Journal, Royal Economic Society, vol. 118(529), pages 222-243, June.
    6. Ricardo Perez-Truglia, 2020. "The Effects of Income Transparency on Well-Being: Evidence from a Natural Experiment," American Economic Review, American Economic Association, vol. 110(4), pages 1019-1054, April.
    7. Goerke, Laszlo & Pannenberg, Markus, 2015. "Direct evidence for income comparisons and subjective well-being across reference groups," Economics Letters, Elsevier, vol. 137(C), pages 95-101.
    8. AndrewE. Clark & Nicolai Kristensen & Niels Westergård-Nielsen, 2009. "Job Satisfaction and Co-worker Wages: Status or Signal?," Economic Journal, Royal Economic Society, vol. 119(536), pages 430-447, March.
    9. Erzo F. P. Luttmer, 2005. "Neighbors as Negatives: Relative Earnings and Well-Being," The Quarterly Journal of Economics, Oxford University Press, vol. 120(3), pages 963-1002.
    10. Clark, Andrew E. & Oswald, Andrew J., 1996. "Satisfaction and comparison income," Journal of Public Economics, Elsevier, vol. 61(3), pages 359-381, September.
    11. Godechot, Olivier & Senik, Claudia, 2015. "Wage comparisons in and out of the firm. Evidence from a matched employer–employee French database," Journal of Economic Behavior & Organization, Elsevier, vol. 117(C), pages 395-410.
    12. Klaus Abbink & David Masclet & Matthijs van Veelen, 2009. "Reference point effects in antisocial preferences," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 09-03, School of Economics, University of East Anglia, Norwich, UK..
    13. Alpizar, Francisco & Carlsson, Fredrik & Johansson-Stenman, Olof, 2005. "How much do we care about absolute versus relative income and consumption?," Journal of Economic Behavior & Organization, Elsevier, vol. 56(3), pages 405-421, March.
    14. Clark, Andrew E. & Etilé, Fabrice, 2011. "Happy house: Spousal weight and individual well-being," Journal of Health Economics, Elsevier, vol. 30(5), pages 1124-1136.
    15. Clark, Andrew E., 1999. "Are wages habit-forming? evidence from micro data," Journal of Economic Behavior & Organization, Elsevier, vol. 39(2), pages 179-200, June.
    16. Sara J. Solnick & David Hemenway, 2005. "Are Positional Concerns Stronger in Some Domains than in Others?," American Economic Review, American Economic Association, vol. 95(2), pages 147-151, May.
    17. Clark, Andrew E. & Oswald, Andrew J., 1998. "Comparison-concave utility and following behaviour in social and economic settings," Journal of Public Economics, Elsevier, vol. 70(1), pages 133-155, October.
    18. 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.
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    Cited by:

    1. Luca Crivelli & Mario Lucchini, 2017. "Health and happiness: an introduction," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 64(2), pages 105-111, June.
    2. Bing Xu & Maxwell Pak, 2021. "Child-raising cost and fertility from a contest perspective," Public Choice, Springer, vol. 186(1), pages 9-28, January.
    3. Kreg Lindberg & Christopher Wolsko, 2019. "Assessing Well-Being Factors in a Growing Community: A Multi-Attribute Vignette Approach," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 144(1), pages 315-335, July.
    4. McGuire, Joel & Kaiser, Caspar & Bach-Mortensen, Anders, 2020. "The impact of cash transfers on subjective well-being and mental health in low- and middle- income countries: A systematic review and meta-analysis," SocArXiv ydr54, Center for Open Science.
    5. Andersen, Asbjørn G. & Kotsadam, Andreas & Somville, Vincent, 2021. "Material resources and well-being — Evidence from an Ethiopian housing lottery," Discussion Paper Series in Economics 11/2021, Norwegian School of Economics, Department of Economics.

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    More about this item

    Keywords

    Happiness; Income; Inequality; Poverty;
    All these keywords.

    JEL classification:

    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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