The Easterlin Paradox

Richard Easterlin and Kelsey O'Connor

No 13923, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The Easterlin Paradox states that at a point in time happiness varies directly with income, both among and within nations, but over time the long-term growth rates of happiness and income are not significantly related. The principal reason for the contradiction is social comparison. At a point in time those with higher income are happier because they are comparing their income to that of others who are less fortunate, and conversely for those with lower income. Over time, however, as incomes rise throughout the population, the incomes of one's comparison group rise along with one's own income and vitiates the otherwise positive effect of own-income growth on happiness. Critics of the Paradox mistakenly present the positive relation of happiness to income in cross-section data or in short-term time fluctuations as contradicting the nil relation of long-term trends.

Keywords: transition countries; fluctuations; trends; short-term; long-term; subjective well-being; life satisfaction; happiness; income; economic growth; Easterlin Paradox; less developed countries; developed countries (search for similar items in EconPapers)
JEL-codes: D60 I31 O10 O5 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2020-12
New Economics Papers: this item is included in nep-hap and nep-ltv
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Citations: View citations in EconPapers (19)

Published - published in: Klaus F. Zimmermann (ed.), Handbook of Labor, Human Resources and Population Economics, Springer, first Online: 06 November 2022 ( latest version )

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Working Paper: The Easterlin Paradox (2020)
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