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Subjective Well-Being, Income, Economic Development and Growth

  • Sacks, Daniel W.
  • Stevenson, Betsey
  • Wolfers, Justin

We explore the relationships between subjective well-being and income, as seen across individuals within a given country, between countries in a given year, and as a country grows through time. We show that richer individuals in a given country are more satisfied with their lives than are poorer individuals, and establish that this relationship is similar in most countries around the world. Turning to the relationship between countries, we show that average life satisfaction is higher in countries with greater GDP per capita. The magnitude of the satisfaction-income gradient is roughly the same whether we compare individuals or countries, suggesting that absolute income plays an important role in influencing well-being. Finally, studying changes in satisfaction over time, we find that as countries experience economic growth, their citizens’ life satisfaction typically grows, and that those countries experiencing more rapid economic growth also tend to experience more rapid growth in life satisfaction. These results together suggest that measured subjective well-being grows hand in hand with material living standards.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8048.

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Date of creation: Oct 2010
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Handle: RePEc:cpr:ceprdp:8048
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  1. Angus Deaton, 2010. "Price Indexes, Inequality, and the Measurement of World Poverty," American Economic Review, American Economic Association, vol. 100(1), pages 5-34, March.
  2. Stevenson, Betsey & Wolfers, Justin, 2008. "Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox," IZA Discussion Papers 3654, Institute for the Study of Labor (IZA).
  3. Stevenson, Betsey & Wolfers, Justin, 2009. "The Paradox of Declining Female Happiness," IZA Discussion Papers 4200, Institute for the Study of Labor (IZA).
  4. repec:pri:cheawb:deaton_income_health_and_wellbeing_around_the_world_evidence_%20from_gallup_world_poll_jep_spring2008 is not listed on IDEAS
  5. Erzo F. P. Luttmer, 2005. "Neighbors as Negatives: Relative Earnings and Well-Being," The Quarterly Journal of Economics, MIT Press, vol. 120(3), pages 963-1002, August.
  6. 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.
  7. Easterlin, Richard A., 2009. "Lost in transition: Life satisfaction on the road to capitalism," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 130-145, August.
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