The New Stylized Facts About Income and Subjective Well-Being

16 Pages Posted: 23 Jan 2013

See all articles by Daniel W. Sacks

Daniel W. Sacks

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy

Betsey Stevenson

University of Michigan at Ann Arbor

Justin Wolfers

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

Multiple version iconThere are 4 versions of this paper

Date Written: January 23, 2013

Abstract

In recent decades economists have turned their attention to data that asks people how happy or satisfied they are with their lives. Much of the early research concluded that the role of income in determining well-being was limited, and that only income relative to others was related to well-being. In this paper, we review the evidence to assess the importance of absolute and relative income in determining well-being. Our research suggests that absolute income plays a major role in determining well-being and that national comparisons offer little evidence to support theories of relative income. We find that well-being rises with income, whether we compare people in a single country and year, whether we look across countries, or whether we look at economic growth for a given country. Through these comparisons we show that richer people report higher well-being than poorer people; that people in richer countries, on average, experience greater well-being than people in poorer countries; and that economic growth and growth in well-being are clearly related. Moreover, the data show no evidence for a satiation point above which income and well-being are no longer related.

Keywords: subjective well-being, life satisfaction, quality of life, Easterlin Paradox, adaptation

JEL Classification: D600, I300, J100, O100

Suggested Citation

Sacks, Daniel W. and Stevenson, Betsey and Wolfers, Justin, The New Stylized Facts About Income and Subjective Well-Being (January 23, 2013). CESifo Working Paper Series No. 4067, Available at SSRN: https://ssrn.com/abstract=2205621

Daniel W. Sacks

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy ( email )

Bloomington, IN 47405
United States

Betsey Stevenson

University of Michigan at Ann Arbor ( email )

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

Justin Wolfers (Contact Author)

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

University of Michigan at Ann Arbor - Gerald R. Ford School of Public Policy ( email )

735 South State Street, Weill Hall
Ann Arbor, MI 48109
United States
734-615-6846 (Phone)

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

The University of Sydney - Discipline of Economics ( email )

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Australia Square
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Australia

Brookings Institution - Economic Studies Program ( email )

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Washington, DC 20036
United States

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

Peter G. Peterson Institute for International Economics ( email )

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Washington, DC 20036
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National Bureau of Economic Research (NBER) ( email )

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

IZA Institute of Labor Economics

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Centre for Economic Policy Research (CEPR)

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United Kingdom

HOME PAGE: http://www.cepr.org/researchers/details/rschcontact.asp?IDENT=157943

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

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Kiel Institute for the World Economy ( email )

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Kiel, Schleswig-Hosltein D-24100
Germany

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