Paradox Lost?

Abstract

Or Paradox Regained? The answer is Paradox Regained. New data confirm that for countries worldwide long-term trends in happiness and real GDP per capita are not significantly positively related. The principal reason that Paradox critics reach a different conclusion, aside from problems of data comparability, is that they do not focus on identifying long-term trends in happiness. For some countries their estimated growth rates of happiness and GDP are not trend rates, but those observed in cyclical expansion or contraction. Mixing these short-term with long-term growth rates shifts a happiness-GDP regression from a horizontal to positive slope.

Keywords: Easterlin Paradox, economic growth, income, happiness, life satisfaction, subjective well-being, transition countries, less developed countries, developed countries, long-term, short-term, trends, fluctuations.

JEL Classification: I31, D60, O10, O5