Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/172764
Authors: 
Yasar, Rusen
Year of Publication: 
2017
Series/Report no.: 
Economics Discussion Papers 2017-113
Abstract: 
Despite rising popularity of subjective well-being (SWB) as a proxy for utility, its relationship with income is still unresolved. Against the background of debates around the 'Easterlin paradox', this paper seeks a compromise between two positions: one that insists on individual relative income, and one that finds similarity between individual and aggregate levels. Proposing a model which puts the emphasis on the interaction between individual and aggregate-level factors, it argues that the effect of relative income on SWB varies across countries as a function of average income, in addition to a relatively small direct effect of the latter, in partial agreement with the two major positions. The model is tested cross-sectionally on the data from the latest wave of World Values Survey. The results from hierarchical mixed-effect models confirm the main argument. But further examination reveals that there is still unaccounted variation especially in middle-income economies.
Subjects: 
subjective well-being
Easterlin paradox
relative income
national income
JEL: 
D31
C31
Creative Commons License: 
http://creativecommons.org/licenses/by/4.0/
Document Type: 
Working Paper

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