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Does Money Buy Happiness? A Longitudinal Study Using Data on Windfalls

  • Gardner, Jonathan

    (University of Warwick)

  • Andrew Oswald

The most fundamental idea in economics is that money makes people happy. This paper constructs a test. It studies longitudinal information on the psychological health and reported happiness of approximately 9,000 randomly chosen people. In the spirit of a natural experiment, the paper shows that those in the panel who receive windfalls -- by winning lottery money or receiving an inheritance -- have higher mental wellbeing in the following year. A windfall of 50,000 pounds (approximately 75,000 US dollars) is associated with a rise in wellbeing of between 0.1 and 0.3 standard deviations. Approximately one million pounds (1.5 million dollars), therefore, would be needed to move someone from close to the bottom of a happiness frequency distribution to close to the top. Whether these happiness gains wear off over time remains an open question.

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Paper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2002 with number 81.

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Date of creation: 29 Aug 2002
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Handle: RePEc:ecj:ac2002:81
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