Working Paper: NBER ID: w14282
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: economic growth; subjective wellbeing; Easterlin Paradox
JEL Codes: D60; I31; J10
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) |
| average levels of subjective wellbeing (I31) | GDP per capita (O49) |
| absolute income levels (D31) | subjective wellbeing (I31) |
| relative income comparisons (D31) | subjective wellbeing (I31) |