Are You Satisfied with Your Income? The Economics of Happiness in India

Lakshmanasamy T ()

Journal of Quantitative Economics, 2010, vol. 8, issue 2, 115-141

Abstract: One of the most enduring debates in the human well-bing research is the relationship between money and happiness. Empirical research both in psychology and in economics show that the correlation between income and happiness is small and this evidence has been used to mean that money does not matter for life satisfaction. This raises an important question that if money does not buy happiness, why most people are after money and material pursuits? This apparent puzzle - known as Easterlin Paradox - has been explained in terms of relative income comparisons. As individuals care greatly about their relative income to others, a rise in the income levels of all people does not raise the happiness level of the individuals. This paper empirically analyses the relation between income and happiness in India using a primary sample data. The estimated ordered probit results show significant positive effects on happiness of both absolute and relative income. This suggests that money does influence happiness and well-being and the individual's life satisfaction is largely influenced by his relative status. When interactions between absolute income and relative income are allowed the relative income effect vanishes suggesting that proportionate shifts in the relative position does not change happiness level. An increase in absolute income may raise happiness, and beyond a certain threshold level people develop aspirations for status positions and hence more money may not bring more happiness.

Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.jqe.co.in/journals/JQE_v8_n2_2010_p8.pdf (application/pdf)

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:jqe:jqenew:v:8:y:2010:i:2:p:115-141

Ordering information: This journal article can be ordered from
Managing Editor, Journal of Quantitative Economics, Indira Gandhi Institute of Development Research (IGIDR), Gen. A.K. Vaidya Marg, Goregaon (E), Mumbai 400 065 , INDIA
http://www.jqe.co.in/

Access Statistics for this article

Journal of Quantitative Economics is currently edited by A. L. Nagar (Editor-in-Chief), D. M. Nachane (Managing-Editor) and G. Mythili (Joint Managing Editor)

More articles in Journal of Quantitative Economics from The Indian Econometric Society Contact information at EDIRC.
Bibliographic data for series maintained by D. M. Nachane () and ().