Money Does Not Buy Much Happiness - But What Have Income Inequality, Modernization and Personal Values Got to Do with it?

Abstract

The Easterlin paradox, which posits that money does not buy happiness since wealthier nations are not better off in terms of subjective well-being than less wealthy nations, is challenged in a seminal study of Stevensson and Wolfers (2008). In the first part of the paper we replicate their findings using the European Values Study (EVS) covering 47 European countries. We also replicate Wilkinson and Pickett’s (2010) findings that countries with higher income inequality levels are less happy nations. But ‘if money does not buy happiness, what else does?’ is a relevant question on which far less is known. In the second part of the paper we examine to what extent objective levels of modernization and stronger support to social and ‘modernization’ values matter for happiness. We estimate hierarchical linear (multi-level) models allowing us to disentangle the individual and country-level effects. We find clear evidence that at the individual level, people holding stronger social values (family and children, altruism and trust) and modernization values (post-materialistic, leisure, gender roles) are on average happier. At the country level, societies at higher levels of modernization and societies with wider support for social and ‘modern’ values turn out to be happier nations.