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Income and happiness: Evidence, explanations and economic implications

Andrew Clark (), Paul Frijters () and Michael Shields

PSE Working Papers from HAL

Abstract: There is now a great deal of micro-econometric evidence, both cross-section and panel, showing that income is positively correlated with well-being. Yet the famous Easterlin paradox shows essentially no change in average happiness at the country level, despite spectacular rises in per capita GDP. We argue that survey well-being questions are indeed good proxy measures of utility, and resolve the Easterlin paradox by appealing to income comparisons: these can be to others (social comparisons) or to oneself in the past (habituation). We review a substantial amount of econometric, experimental and neurological literature consistent with comparisons, and then spell out the implications for a wide range of economic issues.

Keywords: revenu; bien-être; comparaisons sociales; politique économique; habituation; happiness; social comparisons; income; economic policy (search for similar items in EconPapers)
Date: 2006-09
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00590436
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