Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/74715
Authors: 
Pfaff, Tobias
Hirata, Johannes
Year of Publication: 
2013
Series/Report no.: 
SOEPpapers on Multidisciplinary Panel Data Research 554
Abstract: 
Recent studies focused on testing the Easterlin hypothesis (happiness and national income correlate in the cross-section but not over time) on a global level. We make a case for testing the Easterlin hypothesis at the country level where individual panel data allow exploiting important methodological advantages. Novelties of our test of the Easterlin hypothesis are a) long-term panel data and estimation with individual fixed effects, b) regional GDP per capita with a higher variation than national figures, c) accounting for potentially biased clustered standard errors when the number of clusters is small. Using long-term panel data for Germany and the United Kingdom, we do not find robust evidence for a relationship between GDP per capita and life satisfaction in either country (controlling for a variety of variables). Together with the evidence from previous research, we now count three countries for which Easterlin's happiness-income hypothesis cannot be rejected: the United States, Germany, and the United Kingdom.
Subjects: 
subjective well-being
economic growth
income
Easterlin hypothesis
JEL: 
C23
D0
I31
O40
O52
Document Type: 
Working Paper

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