A Reassessment of the Relationship Between GDP and Life Satisfaction

Eugenio Proto and Rustichini
Additional contact information
Rustichini: University of Minnesota

CAGE Online Working Paper Series from Competitive Advantage in the Global Economy (CAGE)

Abstract: Determining the relation between life satisfaction and aggregate income at country level has been problematic, because cross-country and times-series analysis generally give different conclusions. Here we analyze this relation without imposing any polynomial structure to the estimated model and eliminating potentially confounding country-specific factors. We show the existence of a bliss point in the interval between 26,000$ and 30,000$ (2005 in PPP) in relationship between individual life satisfaction and GDP. An almost identical result is found when the relationship between aggregate income of Western European regions and life satisfaction of their residents is analyzed: in this case, data suggest a bliss point between 30,000$ and 33,000$. In both samples, we nd rst evidence of a decreasing level of life satisfaction after the bliss points. Therefore, the analysis overall shows the existence of a hump-shaped pattern between GDP and life satisfaction. We discuss possible explanations of the hump shaped pattern linked to external effects of the aggregate income on life satisfaction due, for example, to habit formation and income comparison and present an econometric test of this potential explanation based on some recent findings of the ve-factor personality theory.

Keywords: Life Satisfaction; GDP; Income; Personality (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www2.warwick.ac.uk/fac/soc/economics/resear ... ns/94.2012_proto.pdf

Related works:
Journal Article: A Reassessment of the Relationship between GDP and Life Satisfaction (2013)
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:cge:wacage:94

Access Statistics for this paper

More papers in CAGE Online Working Paper Series from Competitive Advantage in the Global Economy (CAGE) Contact information at EDIRC.
Bibliographic data for series maintained by Jane Snape ().