IDEAS home Printed from https://ideas.repec.org/a/spr/soinre/v119y2014i2p705-721.html
   My bibliography  Save this article

Resolution of the Happiness–Income Paradox

Author

Listed:
  • Y. Ma

    ()

  • Ye Zhang

    ()

Abstract

It is widely believed that happiness is strongly correlated with wealth and income, but according to the happiness–income paradox, this is not always true. The paradox predicates that there is a strong positive correlation between income and happiness nationally, but the correlation is essentially absent in international comparisons, or in a long-term longitudinal comparison. This paradox has been widely debated among economists and the controversy has persisted for several decades. In this article, the happiness–income paradox is explained in terms of ecological correlation due to spatial aggregation or data-grouping, change of reference classes, and confounding variables. The controversy is resolved when ecological correlations and third-variable effects are accounted for. At the individual level, happiness and income are correlated positively, but not as strongly as many believe. In international comparisons, happiness and income are, in general, quite strongly correlated as well, contrary to what Easterlin (Nations and households in economic growth: essays in honor of Moses Abramovitz, Academic Press, New York, 1974 ) claimed and similar to what others have found, but for different reasons. Long-term comparison is also related to ecological correlation, but it is related to the change of reference classes as well. Copyright Springer Science+Business Media Dordrecht 2014

Suggested Citation

  • Y. Ma & Ye Zhang, 2014. "Resolution of the Happiness–Income Paradox," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 119(2), pages 705-721, November.
  • Handle: RePEc:spr:soinre:v:119:y:2014:i:2:p:705-721
    DOI: 10.1007/s11205-013-0502-9
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s11205-013-0502-9
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Betsey Stevenson & Justin Wolfers, 2008. "Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(1 (Spring), pages 1-102.
    2. Sarracino, Francesco, 2013. "Determinants of subjective well-being in high and low income countries: Do happiness equations differ across countries?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 42(C), pages 51-66.
    3. repec:pri:cepsud:125krueger is not listed on IDEAS
    4. Christian Welzel & Ronald Inglehart, 2010. "Agency, Values, and Well-Being: A Human Development Model," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 97(1), pages 43-63, May.
    5. James Sundali & Rachel Croson, 2006. "Biases in casino betting: The hot hand and the gambler's fallacy," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 1, pages 1-12, July.
    6. 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.
    7. Easterlin, Richard A, 2001. "Income and Happiness: Towards an Unified Theory," Economic Journal, Royal Economic Society, vol. 111(473), pages 465-484, July.
    8. Michael Hagerty & Ruut Veenhoven, 2003. "Wealth and Happiness Revisited – Growing National Income Does Go with Greater Happiness," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 64(1), pages 1-27, October.
    9. 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.
    10. Easterlin, Richard A., 1995. "Will raising the incomes of all increase the happiness of all?," Journal of Economic Behavior & Organization, Elsevier, vol. 27(1), pages 35-47, June.
    11. Easterlin, Richard A. & Angelescu McVey, Laura, 2009. "Happiness and Growth the World Over: Time Series Evidence on the Happiness-Income Paradox," IZA Discussion Papers 4060, Institute for the Study of Labor (IZA).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:spr:soinre:v:133:y:2017:i:1:d:10.1007_s11205-016-1359-5 is not listed on IDEAS
    2. Y. Ma, 2015. "Simpson’s paradox in GDP and per capita GDP growths," Empirical Economics, Springer, vol. 49(4), pages 1301-1315, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:soinre:v:119:y:2014:i:2:p:705-721. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Rebekah McClure). General contact details of provider: http://www.springer.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.