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The Conflictive Relationship between Satisfaction and Income

  • Eduardo Lora
  • Juan Camilo Chaparro

Using the 2006 Gallup World Survey of life satisfaction in 130 countries, this paper finds a very solid relationship between satisfaction and income (both across and within countries) and uncovers the unhappy growth paradox, whereby faster growth rates are accompanied by lower levels of satisfaction. The losses of satisfaction associated with growth are more pronounced in the material domains of life and are greater in richer and more urban societies. At the individual level, although higher incomes tend to be reflected in greater satisfaction, an increase in the income of the social group to which an individual belongs has the opposite effect. The conflictive relationship between satisfaction and income has implications for political economy and may help explain various characteristics of economic and social populism.

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Paper provided by Inter-American Development Bank in its series IDB Publications (Working Papers) with number 6752.

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Date of creation: Nov 2008
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Handle: RePEc:idb:brikps:6752
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  1. Geeta Kingdon & John Knight, 2004. "Community, Comparisons and Subjective Well-being in a Divided Society," Economics Series Working Papers WPS/2004-21, University of Oxford, Department of Economics.
  2. Eduardo Lora & Ugo Panizza, 2002. "Structural Reforms in Latin America under Scrutiny," Research Department Publications 4303, Inter-American Development Bank, Research Department.
  3. 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.
  4. Ed Diener & Ed Sandvik & Larry Seidlitz & Marissa Diener, 1993. "The relationship between income and subjective well-being: Relative or absolute?," Social Indicators Research- An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 28(3), pages 195-223, March.
  5. Di Tella, R. & MacCulloch, R.J.: Oswald, A.J., 1997. "The Macroeconomics of Happiness," Papers 19, Centre for Economic Performance & Institute of Economics.
  6. Carlsson, Fredrik & Gupta, Gautam & Johansson-Stenman, Olof, 2005. "Keeping Up with the Vaishyas: Caste and Relative Standing," Working Papers in Economics 171, University of Gothenburg, Department of Economics.
  7. Stutzer, Alois, 2004. "The role of income aspirations in individual happiness," Journal of Economic Behavior & Organization, Elsevier, vol. 54(1), pages 89-109, May.
  8. Christopher J. Ruhm, 1996. "Are Recessions Good For Your Health?," NBER Working Papers 5570, National Bureau of Economic Research, Inc.
  9. 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).
  10. Alpizar, Francisco & Carlsson, Fredrik & Johansson-Stenman, Olof, 2001. "How Much Do We Care About Absolute Versus Relative Income and Consumption?," Working Papers in Economics 63, University of Gothenburg, Department of Economics.
  11. 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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