Did the Easterlin Paradox apply in South Korea between 1980 and 2015? A case study

Michiel Slag,Ruut Veenhoven,Martijn J Burger

doi:10.1007/s12232-019-00325-w

Michiel Slag, Ruut Veenhoven + Show 1 more

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https://doi.org/10.1007/s12232-019-00325-w

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Abstract

In 1974, Richard Easterlin presented data showing that there is no relationship between economic growth and average happiness in the USA, but at the same time a higher personal income did go hand-in-hand with greater individual happiness in that nation. This phenomenon came to be known as the ‘Easterlin Paradox’. Easterlin explains this pattern using the relative income theory, which holds that the positive effect of income increase is offset by: (a) adaptation to income change and (b) social comparison. There is discussion as to whether this pattern is universal and, in this context, Easterlin et al. (Proc Natl Acad Sci 107(52):22463–22468, 2010) claim that the enormous economic growth in South Korea over the last decade has not led to an increase in average happiness. In this paper, we report an empirical verification of this claim, using other data on South Korea. Contrary to Easterlin’s claim, we found that South Koreans became happier over time and that the relative happiness theory did not apply in this case.

Highlights

1.1 The Easterlin ParadoxIn 1974, Easterlin presented data on the USA, showing that average happiness had not increased between 1946 and 1970, in spite of tremendous economic growth over these years, and that personal income was related to personal happiness in the UnitedBased on master thesis ‘Easterlin Paradox or Easterlin Illusion? Some empirical tests’ (Slag 2017).1 3 Vol.:(0123456789)States of America (USA), rich Americans being happier than their poorer compatriots
At the macro-level, we observed a clear correlation between economic growth and average happiness in South Korea between 1980 and 2015
At the micro-level, we observed that South Koreans whose incomes grew became happier and this gain in happiness was not neutralized by adaptation or social comparison

Summary

Introduction

1.1 The Easterlin ParadoxIn 1974, Easterlin presented data on the USA, showing that average happiness had not increased between 1946 and 1970, in spite of tremendous economic growth over these years, and that personal income was related to personal happiness in the UnitedBased on master thesis ‘Easterlin Paradox or Easterlin Illusion? Some empirical tests’ (Slag 2017).1 3 Vol.:(0123456789)States of America (USA), rich Americans being happier than their poorer compatriots. Since economic growth translates to higher incomes, this finding seemed contradictory and came to be known as the ‘Easterlin Paradox’ Easterlin explained this phenomenon assuming two cognitive mechanisms, ‘adaptation’ and ‘social comparison’, both of which will nullify the effect of income gains. Adaptation neutralizes the effect of extra income when aspirations rise at the same rate and social comparison keeps happiness at the same level; ‘a riding economic tide lifts all boats’ and any difference with references groups (the Jones’s) remains the same. Together these notions are known as ‘relative income theory’

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