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The Easterlin Paradox

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  • Easterlin, Richard A.
  • O’Connor, Kelsey J.

Abstract

The Easterlin Paradox states that at a point in time happiness varies directly with income, both among and within nations, but over time the long-term growth rates of happiness and income are not significantly related. The principal reason for the contradiction is social comparison. At a point in time those with higher income are happier because they are comparing their income to that of others who are less fortunate, and conversely for those with lower income. Over time, however, as incomes rise throughout the population, the incomes of one's comparison group rise along with one's own income and vitiates the otherwise positive effect of own-income growth on happiness. Critics of the Paradox mistakenly present the positive relation of happiness to income in cross-section data or in short-term time fluctuations as contradicting the nil relation of long-term trends.

Suggested Citation

  • Easterlin, Richard A. & O’Connor, Kelsey J., 2020. "The Easterlin Paradox," GLO Discussion Paper Series 743, Global Labor Organization (GLO).
    • Handle: RePEc:zbw:glodps:743
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    References listed on IDEAS

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    5. Larry Dwyer, 2023. "Tourism Degrowth: Painful but Necessary," Sustainability, MDPI, vol. 15(20), pages 1-23, October.
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    7. Felix FitzRoy & Jim Jin & Michael Nolan, 2023. "Higher tax and less work: reverse “Keep up with the Joneses” and rising inequality," Journal of Economics, Springer, vol. 139(3), pages 177-190, August.
    8. Borooah, Vani, 2024. "What Makes People Happy," MPRA Paper 123174, University Library of Munich, Germany.
    9. Borooah, Vani, 2024. "Income and Job Satisfaction," MPRA Paper 123250, University Library of Munich, Germany.
    10. David G. Blanchflower & Alex Bryson, 2020. "Now Unions Increase Job Satisfaction and Well-being," NBER Working Papers 27720, National Bureau of Economic Research, Inc.
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    12. Luo, Jianbo, 2021. "Happiness adaptation to high income: Evidence from German panel data," Economics Letters, Elsevier, vol. 206(C).
    13. Naudé, Wim, 2023. "Melancholy Hues: The Futility of Green Growth and Degrowth, and the Inevitability of Societal Collapse," IZA Discussion Papers 16139, Institute of Labor Economics (IZA).
    14. Kaiser, Caspar, 2022. "Using memories to assess the intrapersonal comparability of wellbeing reports," Journal of Economic Behavior & Organization, Elsevier, vol. 193(C), pages 410-442.
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    JEL classification:

    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • D60 - Microeconomics - - Welfare Economics - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies

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