Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/69372 
Year of Publication: 
2012
Series/Report no.: 
IZA Discussion Papers No. 7105
Publisher: 
Institute for the Study of Labor (IZA), Bonn
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.
Subjects: 
subjective well-being
life satisfaction
quality of life
Easterlin Paradox
adaptation
economic growth
JEL: 
D6
I3
J1
O1
Document Type: 
Working Paper

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