Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox
81 Pages Posted: 2 Dec 2008
Date Written: August 2008
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 well-being, well-being-income gradient
JEL Classification: D6, I3, J1
Suggested Citation: Suggested Citation