Income–happiness paradox in Australia: Testing the theories of adaptation and social comparison

Satya Paul and Daniel Guilbert

Economic Modelling, 2013, vol. 30, issue C, 900-910

Abstract: This paper investigates whether the theories of adaptation and social comparison can explain the income–happiness puzzle (Easterlin Paradox) in Australia. Alternative specifications of happiness model that incorporate adaption, comparison incomes and other relevant variables are estimated using the panel data from the five waves (2001–2005) of the Household Income and Labour Dynamics in Australia (HILDA) surveys. The statistical tests provide no support for the adaptation effect on happiness. However, we find strong support for the theory of social comparison as an explanation for the happiness paradox. An increase in peer group income hurts the poor more than the rich, suggesting that a redistribution of income is likely to enhance the overall wellbeing of society. A sensitivity analysis is conducted to check the robustness of results.

Keywords: Life satisfaction; Adaptation; Comparison income; Easterlin paradox (search for similar items in EconPapers)
JEL-codes: D3 D6 I3 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264999312003483
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:30:y:2013:i:c:p:900-910

DOI: 10.1016/j.econmod.2012.08.034

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().