Discussion Paper Details

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

Author(s): Betsey Stevenson and Justin Wolfers

Publication Date: August 2008

Keyword(s): Easterlin Paradox, economic growth, happiness, hedonic treadmill, life satisfaction, quality of life, subjective well-being and well-being-income gradient

Programme Area(s): Development Economics, Labour Economics and Public Economics

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.

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Bibliographic Reference

Stevenson, B and Wolfers, J. 2008. 'Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox'. London, Centre for Economic Policy Research.