Adaptation and the Easterlin Paradox

Andrew Clark

Working Papers from HAL

Abstract: Two behavioural explanations of the Easterlin Paradox are commonly advanced. The first appeals to social comparisons, whereby individual i compares her income (Yit) to a comparison income level earned by some other individual or group j (Y*jt). The second explanation is that of adaptation to higher levels of income. This is of the same nature, but here the individual's current income is compared to her own income in the past (i.e. Yit is compared to Yit-τ, for some positive value or values of τ). The first of these explanations has attracted far more empirical attention than has the second. This is probably for data-availability reasons, as the investigation of the latter requires panel information. There is also a suspicion that large changes in Yit might be accompanied by a movement in some other variable that is also correlated with subjective well-being. We here review the empirical evidence that individuals do indeed compare current to past income, and then whether individuals adapt in general to aspects of their economic and social life. Last, we ask whether adaptation is in fact a viable explanation of the Easterlin Paradox.

Keywords: Income; Adaptation; Easterlin Paradox (search for similar items in EconPapers)
Date: 2015-02
New Economics Papers: this item is included in nep-hap, nep-hpe and nep-ltv
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01112725v1
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Citations: View citations in EconPapers (5)

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Related works:
Chapter: Adaptation and the Easterlin Paradox (2016)
Working Paper: Adaptation and the Easterlin Paradox (2016)
Working Paper: Adaptation and the Easterlin Paradox (2016)
Working Paper: Adaptation and the Easterlin Paradox (2015)
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