The Easterlin paradox at 50

Oparina, Ekaterina ORCID: 0000-0002-1544-8751, Clark, Andrew E. and Layard, Richard ORCID: 0000-0002-1313-699X (2024) The Easterlin paradox at 50. CEP Discussion Papers (CEPDP2048). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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Abstract

We use Gallup World Poll data from over 150 countries from 2009-2019 at both the individual and country levels to revisit the relationship between income and subjective wellbeing. Our inspiration is the paradox first proposed by Easterlin (1974), according to which higher incomes are associated with greater happiness in cross-sections yet increases in a country's GDP per head do not increase its average wellbeing. In our analysis subjective wellbeing (or happiness) is measured by the Cantril ladder on a 0-10 scale. Across individuals, other things equal, one unit of log income raises subjective wellbeing by 0.4 points. In other words, doubling income raises wellbeing by 0.3 points out of 10. Across countries, a crude regression of log income on per capita income gives a higher coefficient of 0.6. But, once social variables like health and social support are introduced, the picture changes. In rich countries, income no longer has a significant effect, either in country cross-sections or in time series: higher income only matters due to its correlation with the social variables. For low-income countries the result is also clear cut - income raises happiness in both cross-section and time series, whether the social variables are controlled for or not. For middle income countries the result is mixed.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://cep.lse.ac.uk/_new/publications/discussion...
Additional Information:	©2024 The Author(s)
Divisions:	Centre for Economic Performance
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HN Social history and conditions. Social problems. Social reform H Social Sciences > HB Economic Theory
JEL classification:	F - International Economics > F1 - Trade > F15 - Economic Integration R - Urban, Rural, and Regional Economics > R1 - General Regional Economics > R10 - General R - Urban, Rural, and Regional Economics > R1 - General Regional Economics > R12 - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade
Date Deposited:	19 Feb 2025 18:03
Last Modified:	19 Feb 2025 18:15
URI:	http://eprints.lse.ac.uk/id/eprint/126798

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