Working Paper: CEPR ID: DP6944
Authors: Betsey Stevenson; Justin Wolfers
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.
Keywords: Easterlin Paradox; Economic Growth; Happiness; Hedonic Treadmill; Life Satisfaction; Quality of Life; Subjective Wellbeing; Wellbeing-Income Gradient
JEL Codes: D6; I3; J1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| GDP per capita (O49) | average levels of subjective wellbeing (I31) |
| economic growth (O49) | rising happiness (I31) |
| higher incomes (J39) | greater happiness (I31) |
| economic growth (O49) | subjective wellbeing over time (I31) |