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The Great Happiness Moderation

  • Clark, Andrew E.

    ()

    (Paris School of Economics)

  • Flèche, Sarah

    ()

    (Paris School of Economics)

  • Senik, Claudia

    ()

    (Paris School of Economics)

This paper shows that within-country happiness inequality has fallen in the majority of countries that have experienced positive income growth over the last forty years, in particular in developed countries. This new stylized fact comes as an addition to the Easterlin paradox, which states that the time trend in average happiness is flat during episodes of long-run income growth. This mean-preserving declining spread in happiness comes about via falls in both the share of individuals who declare low and high levels of happiness. Rising income inequality moderates the fall in happiness inequality, and may even reverse it after some point, for example in the US starting in the 1990s. Hence, if raising the income of all does not raise the happiness of all, it will at least harmonize the happiness of all, providing that income inequality does not grow too much. Behind the veil of ignorance, lower happiness inequality would certainly be considered as attractive by risk-averse individuals.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6761.

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Length: 53 pages
Date of creation: Jul 2012
Date of revision:
Publication status: published in: Andrew Clark and Claudia Senik (eds.), Happiness and Economic Growth: Lessons from Developing Countries. Oxford: Oxford University Press, 2014, 22-139
Handle: RePEc:iza:izadps:dp6761
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  1. Proto, Eugenio & Rustichini, Aldo, 2012. "Life Satisfaction, Household Income and Personality Traits," The Warwick Economics Research Paper Series (TWERPS) 988, University of Warwick, Department of Economics.
  2. Alois Stutzer, . "The Role of Income Aspirations in Individual Happiness," IEW - Working Papers 124, Institute for Empirical Research in Economics - University of Zurich.
  3. Betsey Stevenson & Justin Wolfers, 2011. "Trust in Public Institutions over the Business Cycle," American Economic Review, American Economic Association, vol. 101(3), pages 281-87, May.
  4. Gert G. Wagner & Joachim R. Frick & Jürgen Schupp, 2007. "The German Socio-Economic Panel Study (SOEP): Scope, Evolution and Enhancements," SOEPpapers on Multidisciplinary Panel Data Research 1, DIW Berlin, The German Socio-Economic Panel (SOEP).
  5. Andrew E. Clark & Claudia Senik, 2010. "Will GDP growth increase happiness in developing countries?," PSE Working Papers halshs-00564985, HAL.
  6. Luca Gambetti & Jordi Gal�, 2009. "On the Sources of the Great Moderation," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 26-57, January.
  7. Richard Layard & Guy Mayraz & Stephen Nickell, 2009. "Does Relative Income Matter? Are the Critics Right?," CEP Discussion Papers dp0918, Centre for Economic Performance, LSE.
  8. Clark, Andrew E. & Frijters, Paul & Shields, Michael A., 2007. "Relative Income, Happiness and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," IZA Discussion Papers 2840, Institute for the Study of Labor (IZA).
  9. DiTella, Rafael & MacCulloch, Robert & Oswald, Andrew J., 1999. "The macroeconomics of happiness," ZEI Working Papers B 03-1999, ZEI - Center for European Integration Studies, University of Bonn.
  10. Charles Kenny, 2005. "Does Development Make You Happy? Subjective Wellbeing And Economic Growth In Developing Countries," Social Indicators Research, Springer, vol. 73(2), pages 199-219, 09.
  11. 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.
  12. 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.
  13. Indranil Dutta & James Foster, 2011. "Inequality of Happiness in US: 1972-2008," The School of Economics Discussion Paper Series 1110, Economics, The University of Manchester.
  14. Di Tella, Rafael & MacCulloch, Robert, 2008. "Gross national happiness as an answer to the Easterlin Paradox?," Journal of Development Economics, Elsevier, vol. 86(1), pages 22-42, April.
  15. Ada Ferrer-i-Carbonell & Paul Frijters, 2004. "How Important is Methodology for the estimates of the determinants of Happiness?," Economic Journal, Royal Economic Society, vol. 114(497), pages 641-659, 07.
  16. Tomi Ovaska & Ryo Takashima, 2010. "Does a Rising Tide Lift All the Boats? Explaining the National Inequality of Happiness," Journal of Economic Issues, M.E. Sharpe, Inc., vol. 44(1), pages 205-224, March.
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