Income and happiness: Evidence, explanations and economic implications

Andrew Clark, Paul Frijters and Michael Shields

Abstract: There is now a great deal of micro-econometric evidence, both cross-section and panel, showing that income is positively correlated with well-being. Yet the famous Easterlin paradox shows essentially no change in average happiness at the country level, despite spectacular rises in per capita GDP. We argue that survey well-being questions are indeed good proxy measures of utility, and resolve the Easterlin paradox by appealing to income comparisons: these can be to others (social comparisons) or to oneself in the past (habituation). We review a substantial amount of econometric, experimental and neurological literature consistent with comparisons, and then spell out the implications for a wide range of economic issues.

Keywords: politique économique; comparaisons sociales; bien-être; revenu; income; happiness; social comparisons; habituation; economic policy (search for similar items in EconPapers)
Date: 2006-09
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00590436v1
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Citations: View citations in EconPapers (81)

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Working Paper: Income and happiness: Evidence, explanations and economic implications (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:psewpa:halshs-00590436

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