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

83 Pages Posted: 25 Sep 2008  

Betsey Stevenson

University of Michigan

Justin Wolfers

University of Michigan at Ann Arbor - Department of Economics; The Ford School of Public Policy, University of Michigan; University of Sydney Department of Economics; The Brookings Institution; Peterson Institute for International Economics; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); Kiel Institute for the World Economy

Multiple version iconThere are 5 versions of this paper

Date Written: September 2008

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: happiness, subjective well-being, Easterlin Paradox, life satisfaction, economic growth, well-being-income gradient, hedonic treadmill

JEL Classification: D6, I3, J1

Suggested Citation

Stevenson, Betsey and Wolfers, Justin, Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox (September 2008). CESifo Working Paper Series No. 2394. Available at SSRN: https://ssrn.com/abstract=1273524

Betsey Stevenson (Contact Author)

University of Michigan ( email )

500 S. State Street
Ann Arbor, MI 48109
United States

Justin Wolfers

University of Michigan at Ann Arbor - Department of Economics ( email )

611 Tappan Street
Ann Arbor, MI 48109-1220
United States
734-764-2447 (Phone)

HOME PAGE: http://www.nber.org/~jwolfers

The Ford School of Public Policy, University of Michigan ( email )

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734-615-6846 (Phone)

HOME PAGE: http://www.nber.org/~jwolfers

University of Sydney Department of Economics ( email )

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The Brookings Institution ( email )

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HOME PAGE: http://www.nber.org/~jwolfers

Peterson Institute for International Economics ( email )

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National Bureau of Economic Research (NBER) ( email )

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United States

HOME PAGE: http://www.nber.org/~jwolfers

Institute for the Study of Labor (IZA)

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Bonn, D-53072
Germany

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Centre for Economic Policy Research (CEPR)

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CESifo (Center for Economic Studies and Ifo Institute) ( email )

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Kiel Institute for the World Economy ( email )

P.O. Box 4309
Kiel, D-24100
Germany

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