Journal Article
No. 2018-43 | June 29, 2018
Subjective well-being and income: a compromise between Easterlin paradox and its critiques

Abstract

Despite rising popularity of subjective well-being (SWB) as a proxy for utility, its relationship with income is still unresolved. Against the background of debates around the ‘Easterlin paradox’, this paper seeks a compromise between two positions: one that insists on individual relative income, and one that finds similarity between individual and aggregate levels. Proposing a model which puts the emphasis on the interaction between individual and aggregate-level factors, it argues that the effect of relative income on SWB varies across countries as a function of average income, in addition to a relatively small direct effect of the latter, in partial agreement with the two major positions. The model is tested cross-sectionally on the data from the latest wave of World Values Survey. The results from hierarchical mixed-effect models confirm the main argument. But further examination reveals that there is still unaccounted variation especially in middle-income economies.

Data Set

JEL Classification:

D31, C31

Assessment

  • Downloads: 364 (Discussion Paper: 464)

Links

Cite As

Rusen Yasar (2018). Subjective well-being and income: a compromise between Easterlin paradox and its critiques. Economics: The Open-Access, Open-Assessment E-Journal, 12 (2018-43): 1–23. http://dx.doi.org/10.5018/economics-ejournal.ja.2018-43


Comments and Questions


Gerasimos Soldatos - article review
July 06, 2018 - 08:45

This is a good paper which might benefit more by: https://www.scribd.com/document/81680538/Handbook-on-the-Economics-of-Happiness-Bruni-and-Porta-2007