Subjective Well-Being: Easterlin Paradox, the (Decreasing) Return(s)? From Log to Square, New Evidence from Wealthier Data

36 Pages Posted: 31 Jan 2011 Last revised: 19 Feb 2011

Date Written: January 30, 2011

Abstract

The quest for happiness is neither new for human beings, nor for economists. With the systematization of household surveys, Subjective Well-Being studies have flourished. Discussions now focus on the slope of the virtually unchallenged curvilinear functional form between income and life satisfaction. Indeed, if growth positive returns are not -yet- contested for societies that have difficulties satisfying their population’s basic needs, the correlation between income and Subjective Well-Being in wealthier countries has no consensus; from flat to steep, researchers dither…

Benefitting from larger datasets, recent papers have attempted to debunk the Easterlin paradox. They show that self-reported well-being is steadily and positively correlated with income and growth, even in developed countries.

However, using the most up-to-date global surveys, calculations cast doubt upon the belief in an eternal sunshine relation between income and “happiness”. Indeed, we observe that the curvilinear relation between income and happiness could be challenged by the quadratic one. Thus, it now appears difficult to reject the possibility of decreasing returns, to the extent that it might be possible to consider, not only a weak, but a negative correlation between income and happiness for wealthier countries. Nevertheless, this perspective is likely dependent on the sample size. Moreover, we claim no direct causality for the uncovered negative slope. Further investigations would be necessary to prove, inform - or disprove - these new findings.

Keywords: Happiness, subjective well-being, life satisfaction, quality of life, economic growth, development, Easterlin Paradox , Econometrics, Behavioral Economics

JEL Classification: D60, O1, I0, C81, C3

Suggested Citation

Roca, Thomas, Subjective Well-Being: Easterlin Paradox, the (Decreasing) Return(s)? From Log to Square, New Evidence from Wealthier Data (January 30, 2011). Available at SSRN: https://ssrn.com/abstract=1751686 or http://dx.doi.org/10.2139/ssrn.1751686

Thomas Roca (Contact Author)

Data-Pop Alliance ( email )

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