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Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox

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  • Stevenson, Betsey

    ()

  • Wolfers, Justin

    () (University of Michigan)

Abstract

The “Easterlin paradox” suggests that there is no link between a society’s economic development and its average level of happiness. We re-assess this paradox analyzing multiple rich datasets spanning many decades. Using recent data on a broader array of countries, we establish a clear positive link between average levels of subjective well-being and GDP per capita across countries, and find no evidence of a satiation point beyond which wealthier countries have no further increases in subjective well-being. We show that the estimated relationship is consistent across many datasets and is similar to the relationship between subject well-being and income observed within countries. Finally, examining the relationship between changes in subjective well-being and income over time within countries we find economic growth associated with rising happiness. Together these findings indicate a clear role for absolute income and a more limited role for relative income comparisons in determining happiness.

Suggested Citation

  • Stevenson, Betsey & Wolfers, Justin, 2008. "Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox," IZA Discussion Papers 3654, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp3654
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    References listed on IDEAS

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    More about this item

    Keywords

    subjective well-being; Easterlin Paradox; life satisfaction; economic growth; well-being-income gradient; happiness; hedonic treadmill;
    All these keywords.

    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • J1 - Labor and Demographic Economics - - Demographic Economics

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