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

Betsey Stevenson and Justin Wolfers
Brookings Papers on Economic Activity
Vol. 2008 (Spring, 2008), pp. 1-87
Stable URL: http://www.jstor.org/stable/27561613
Page Count: 87
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Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox
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Abstract

The "Easterlin paradox" suggests that there is no link between a society's economic development and its average level of happiness. We reassess 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 that between subjective 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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