The Easterlin Paradox

42 Pages Posted: 7 Dec 2020

See all articles by Richard A. Easterlin

Richard A. Easterlin

University of Southern California - Department of Economics; IZA Institute of Labor Economics

Kelsey O'Connor

STATEC Research; IZA Institute of Labor Economics

Abstract

The Easterlin Paradox states that at a point in time happiness varies directly with income, both among and within nations, but over time the long-term growth rates of happiness and income are not significantly related. The principal reason for the contradiction is social comparison. At a point in time those with higher income are happier because they are comparing their income to that of others who are less fortunate, and conversely for those with lower income. Over time, however, as incomes rise throughout the population, the incomes of one's comparison group rise along with one's own income and vitiates the otherwise positive effect of own-income growth on happiness. Critics of the Paradox mistakenly present the positive relation of happiness to income in cross-section data or in short-term time fluctuations as contradicting the nil relation of long-term trends.

JEL Classification: I31, D60, O10, O5

Suggested Citation

Easterlin, Richard A. and O'Connor, Kelsey, The Easterlin Paradox. IZA Discussion Paper No. 13923, Available at SSRN: https://ssrn.com/abstract=3743147 or http://dx.doi.org/10.2139/ssrn.3743147

Richard A. Easterlin (Contact Author)

University of Southern California - Department of Economics ( email )

3620 South Vermont Ave. Kaprielian (KAP) Hall, 300
Los Angeles, CA 90089
United States

IZA Institute of Labor Economics

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Kelsey O'Connor

STATEC Research ( email )

BP 304
Luxembourg City, L-2013
Luxembourg

HOME PAGE: http://https://statistiques.public.lu/en/actors/statec/organisation/red/index.html

IZA Institute of Labor Economics ( email )

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Germany

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