NBER WORKING PAPER SERIES SUBJECTIVE WELL-BEING, INCOME, ECONOMIC DEVELOPMENT AND GROWTH

We explore the relationships between subjective well-being and income, as seen across individuals within a given country, between countries in a given year, and as a country grows through time. We show that richer individuals in a given country are more satisfied with their lives than are poorer individuals, and establish that this relationship is similar in most countries around the world. Turning to the relationship between countries, we show that average life satisfaction is higher in countries with greater GDP per capita. The magnitude of the satisfaction-income gradient is roughly the same whether we compare individuals or countries, suggesting that absolute income plays an important role in influencing well-being. Finally, studying changes in satisfaction over time, we find that as countries experience economic growth, their citizens' life satisfaction typically grows, and that those countries experiencing more rapid economic growth also tend to experience more rapid growth in life satisfaction. These results together suggest that measured subjective well-being grows hand in hand with material living standards.

[1]  Erzo F. P. Luttmer.  Neighbors as Negatives: Relative Earnings and Well-Being , 2004 .

[2]  Dimitrios Nikolaou Koumparoulis.  Public capital, employment and productivity: An empirical investigation for Greece , 2010 .

[3]  R. Di Tella,et al.  Happiness Adaptation to Income Beyond "Basic Needs" , 2008 .

[4]  Marcus Dittrich,et al.  Union Membership and Employment Dynamics: A Note , 2010, SSRN Electronic Journal.

[5]  R. Easterlin,et al.  Happiness and Growth the World Over: Time Series Evidence on the Happiness-Income Paradox , 2009, SSRN Electronic Journal.

[6]  John Whalley,et al.  The Rapidly Deepening India-China Economic Relationship , 2010, SSRN Electronic Journal.

[7]  Paolo Manasse,et al.  The Twin Effects of Globalization - Evidence from a Sample of Indian Manufacturing Firms , 2010 .

[8]  Richard E. Lucas,et al.  Beyond the hedonic treadmill: revising the adaptation theory of well-being. , 2006, The American psychologist.

[9]  Robert H. Frank,et al.  Does money buy happiness , 2005 .

[10]  D. Kahneman,et al.  Would You Be Happier If You Were Richer? A Focusing Illusion , 2006, Science.

[11]  A. Pereira,et al.  Will Women Save More than Men? A Theoretical Model of Savings and Marriage , 2010, SSRN Electronic Journal.

[12]  D. Campbell,et al.  Hedonic relativism and planning the good society , 1971 .

[13]  D. Kahneman,et al.  Developments in the Measurement of Subjective Well-Being , 2006 .

[14]  Justin Wolfers,et al.  The Paradox of Declining Female Happiness , 2009, SSRN Electronic Journal.

[15]  E. Diener.  Guidelines for National Indicators of Subjective Well-Being and Ill-Being , 2006 .

[16]  Thomas Steger,et al.  History, Expectations, and Public Policy: Economic Development in Eastern Germany , 2010, SSRN Electronic Journal.

[17]  R. Layard.  Happiness: Lessons from a New Science , 2005 .

[18]  Fabian J Theis,et al.  Which Sectors of a Modern Economy are Most Central? , 2010, SSRN Electronic Journal.

[19]  R. Easterlin.  Does Economic Growth Improve the Human Lot? Some Empirical Evidence , 1974 .

[20]  Michael Binder,et al.  On the Conditional Effects of IMF Program Participation on Output Growth , 2010, SSRN Electronic Journal.

[21]  Justin Wolfers,et al.  Subjective Well-Being, Income, Economic Development and Growth , 2010 .

[22]  Wendy Carlin,et al.  Good Institutions Are Not Enough: Ongoing Challenges of East German Development , 2010, SSRN Electronic Journal.

[23]  Andreas Wagener,et al.  Inefficient Group Organization as Optimal Adaptation to Dominant Environments , 2010 .

[24]  Glenn Ellison,et al.  How Does the Market Use Citation Data? The Hirsch Index in Economics , 2010, SSRN Electronic Journal.

[25]  Peter Zweifel,et al.  Is the Welfare State Sustainable ? Experimental Evidence on Citizens ’ Preferences for Redistribution , 2010 .

[26]  R. Easterlin.  Will raising the incomes of all increase the happiness of all , 1995 .

[27]  Klaus Wohlrabe,et al.  Predictive Ability of Business Cycle Indicators Under Test: A Case Study for the Euro Area Industrial Production , 2010 .

[28]  P. Graves,et al.  Benefit-Cost Analysis of Environmental Projects: A Plethora of Systematic Biases , 2010, SSRN Electronic Journal.

[29]  Economics and Happiness: Framing the Analysis , 2009 .

[30]  Richard A. Easterlin,et al.  Feeding the Illusion of Growth and Happiness: A Reply to Hagerty and Veenhoven , 2005 .

[31]  Yosef Mealem,et al.  Political Culture and Discrimination in Contests , 2010, SSRN Electronic Journal.

[32]  Armin Falk,et al.  Did We Overestimate the Role of Social Preferences? The Case of Self-Selected Student Samples , 2010, SSRN Electronic Journal.

[33]  Thomas Aronsson,et al.  The Standard Deviation of Life-Length, Retirement Incentives, and Optimal Pension Design , 2010, SSRN Electronic Journal.

[34]  A. Kemnitz,et al.  Educational Federalism and the Quality Effects of Tuition Fees , 2010, SSRN Electronic Journal.

[35]  R. Easterlin.  Lost in Transition: Life Satisfaction on the Road to Capitalism , 2008, SSRN Electronic Journal.

[36]  J. Hausman,et al.  Contingent Valuation: Is Some Number Better than No Number? , 1994 .

[37]  R. Easterlin.  Diminishing Marginal Utility of Income? Caveat Emptor , 2005 .

[38]  Steven J. Haider.  Earnings Instability and Earnings Inequality of Males in the United States: 1967–1991 , 2001, Journal of Labor Economics.

[39]  Timo Wollmershäuser,et al.  A micro data approach to the identification of credit crunches , 2010 .

[40]  Klaus Abberger,et al.  The IFO Business Cycle Clock: Circular Correlation with the Real GDP , 2010, SSRN Electronic Journal.

[41]  Dan Kovenock,et al.  Conflicts with Multiple Battlefields , 2010, SSRN Electronic Journal.

[42]  Konstantinos Angelopoulos,et al.  Fear of Model Misspecification and the Robustness Premium , 2010, SSRN Electronic Journal.

[43]  Angus Deaton.  Price Indexes, Inequality, and the Measurement of World Poverty , 2010 .

[44]  Geir B. Asheim,et al.  Justifying Social Discounting: The Rank-Discounted Utilitarian Approach , 2010, J. Econ. Theory.

[45]  Justin L. Tobias,et al.  Nonparametric Density and Regression Estimation , 2001 .

[46]  Hadley Cantril,et al.  The pattern of human concerns , 1965 .

[47]  Nikolaus Wolf,et al.  Europe's Great Depression: Coordination Failure after the First World War , 2010 .

[48]  Wallace P. Mullin,et al.  Massachusetts Institute of Technology Department of Economics Working Paper Series Diversity, Social Goods Provision, and Performance in the Firm Diversity, Social Goods Provision, and Performance in the Firm , 2022 .

[49]  Michael Hoel,et al.  Is There a Green Paradox? , 2010, SSRN Electronic Journal.

[50]  Is Business Cycle Volatility Costly? Evidence from Surveys of Subjective Wellbeing , 2002 .

[51]  R. Easterlin,et al.  Happiness and Economic Growth: Does the Cross Section Predict Time Trends? Evidence from Developing Countries , 2009 .

[52]  Marco Runkel,et al.  Subsidizing Renewable Energy Under Capital Mobility , 2010, SSRN Electronic Journal.

[53]  Gary S. Becker,et al.  Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox , 2008 .

[54]  P. Graves,et al.  Appropriate Fiscal Policy Over the Business Cycle: Proper Stimulus Policies Can Work , 2010, SSRN Electronic Journal.

[55]  J. Boyd,et al.  Bank Competition, Asset Allocations and Risk of Failure: An Empirical Investigation , 2010 .

[56]  Angus Deaton,et al.  Income, health, and well-being around the world: evidence from the Gallup World Poll. , 2008, The journal of economic perspectives : a journal of the American Economic Association.

[57]  R. Frank.  Does Absolute Income Matter , 2005 .

[58]  E. Diener,et al.  Subjective well-being. , 1984, Psychological bulletin.

[59]  Jørgen Juel Andersen,et al.  Voting When the Stakes are High , 2010, SSRN Electronic Journal.

[60]  R. Moffitt,et al.  The growth of earnings instability in the U , 1994 .

[61]  S. Wales.  A world of pain. , 2006, Nursing standard (Royal College of Nursing (Great Britain) : 1987).

[62]  Thomas Lange,et al.  A Note on Brain Gain and Brain Drain: Permanent Migration and Education Policy , 2010, SSRN Electronic Journal.

[63]  S. Carson,et al.  Nineteenth Century US African-American and White Female Statures: Insight from US Prison Records , 2010, SSRN Electronic Journal.

[64]  Sandra Eickmeier,et al.  Macroeconomic Factors and Micro-Level Bank Risk , 2010, SSRN Electronic Journal.