IDEAS home Printed from
   My bibliography  Save this paper

A Reassessment of the Relationship Between GDP and Life Satisfaction


  • Proto, Eugenio

    (University of Warwick)

  • Rustichini

    (University of Minnesota)


Determining the relation between life satisfaction and aggregate income at country level has been problematic, because cross-country and times-series analysis generally give different conclusions. Here we analyze this relation without imposing any polynomial structure to the estimated model and eliminating potentially confounding country-specific factors. We show the existence of a bliss point in the interval between 26,000$ and 30,000$ (2005 in PPP) in relationship between individual life satisfaction and GDP. An almost identical result is found when the relationship between aggregate income of Western European regions and life satisfaction of their residents is analyzed: in this case, data suggest a bliss point between 30,000$ and 33,000$. In both samples, we nd rst evidence of a decreasing level of life satisfaction after the bliss points. Therefore, the analysis overall shows the existence of a hump-shaped pattern between GDP and life satisfaction. We discuss possible explanations of the hump shaped pattern linked to external effects of the aggregate income on life satisfaction due, for example, to habit formation and income comparison and present an econometric test of this potential explanation based on some recent findings of the ve-factor personality theory.

Suggested Citation

  • Proto, Eugenio & Rustichini, 2012. "A Reassessment of the Relationship Between GDP and Life Satisfaction," CAGE Online Working Paper Series 94, Competitive Advantage in the Global Economy (CAGE).
  • Handle: RePEc:cge:wacage:94

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Andrew Clark & Fabrice Etilé & Fabien Postel-Vinay & Claudia Senik & Karine Van der Straeten, 2005. "Heterogeneity in Reported Well-Being: Evidence from Twelve European Countries," Economic Journal, Royal Economic Society, vol. 115(502), pages 118-132, March.
    2. Blanchflower, David G. & Oswald, Andrew J., 2004. "Well-being over time in Britain and the USA," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1359-1386, July.
    3. 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.
    4. Stutzer, Alois, 2004. "The role of income aspirations in individual happiness," Journal of Economic Behavior & Organization, Elsevier, vol. 54(1), pages 89-109, May.
    5. 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.
    6. Andrew Caplin & Mark Dean, 2008. "Dopamine, Reward Prediction Error, and Economics," The Quarterly Journal of Economics, Oxford University Press, vol. 123(2), pages 663-701.
    7. Layard, R. & Mayraz, G. & Nickell, S., 2008. "The marginal utility of income," Journal of Public Economics, Elsevier, vol. 92(8-9), pages 1846-1857, August.
    8. 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.
    9. Clark, Andrew E. & Oswald, Andrew J., 1996. "Satisfaction and comparison income," Journal of Public Economics, Elsevier, vol. 61(3), pages 359-381, September.
    10. Viola Angelini & Danilo Cavapozzi & Luca Corazzini & Omar Paccagnella, 2014. "Do Danes and Italians Rate Life Satisfaction in the Same Way? Using Vignettes to Correct for Individual-Specific Scale Biases," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 76(5), pages 643-666, October.
    11. Easterlin, Richard A., 2005. "A puzzle for adaptive theory," Journal of Economic Behavior & Organization, Elsevier, vol. 56(4), pages 513-521, April.
    12. repec:pri:cheawb:deaton_income_health_and_wellbeing_around_the_world_evidence_%20from_gall is not listed on IDEAS
    13. Oswald, Andrew J. & Wu, Stephen, 2010. "Objective Confirmation of Subjective Measures of Human Well-being: Evidence from the USA," IZA Discussion Papers 4695, Institute for the Study of Labor (IZA).
    14. 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.
    15. David, Paul A. & Reder, Melvin W. (ed.), 1974. "Nations and Households in Economic Growth," Elsevier Monographs, Elsevier, edition 1, number 9780122050503.
    16. Richard Easterlin, 2005. "Feeding the Illusion of Growth and Happiness: A Reply to Hagerty and Veenhoven," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 74(3), pages 429-443, December.
    Full references (including those not matched with items on IDEAS)


    Blog mentions

    As found by, the blog aggregator for Economics research:
    1. Random thoughts on happiness: how to be happy?
      by noname in ZeeConomics on 2015-07-22 13:16:39


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

    Cited by:

    1. Femke De Keulenaer & Jan-Emmanuel De Neve & Georgios Kavetsos & Michael I. Norton & Bert Van Landeghem & George W. Ward, 2014. "The Asymmetric Experience of Positive and Negative Economic Growth: Global Evidence Using Subjective Well-Being Data," CEP Discussion Papers dp1304, Centre for Economic Performance, LSE.

    More about this item


    Life Satisfaction; GDP; Income; Personality;


    Access and download statistics


    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:cge:wacage:94. 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: (Jane Snape). General contact details of provider: .

    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.