Easterlin Paradox Research Articles

The Effect of Income Inequality on Happiness Inequality in India: A Recentered Influence Function Regression Estimation and Life Satisfaction Inequality Decomposition

It is now an accepted stylised fact that increase in happiness level in any country is not commensurate with growth in income, a puzzle known as Easterlin Paradox. This paper analyses the income-happiness relationship in India and tries to explain the flat happiness response to income change in terms of rising income inequality. Income growth propels inequality and so also inequality in well-being. Empirically the effects of income inequality, absolute income, relative income, rank position and social capital indices are analysed using World Value Survey data for 12 states of India over 24 years from 1990 to 2014. As the variation in the 10-point scale measure of life satisfaction level is narrow, an recentered influence function (RIF) regression of variance and Gini of life satisfaction are estimated. The life satisfaction inequality is decomposed into composition and coefficients effects using Blinder–Oaxaca (B–O) decomposition method. The estimated RIF coefficients reveal significant effects on life satisfaction inequality of various income measures and social capital indices. The B–O decomposition shows that the functional relationship between material aspirations and life satisfaction, contribute significantly to rising life satisfaction inequality relative to changes over time in happiness influencing factors. Reducing income inequality and improving trust, sociability, health, education and employment over time and space could reduce life satisfaction inequality and improve happiness level in India.

Determinants Of Subjective Well-Being: Evidence Of Urban Indonesia

Happiness studies on economics have increasingly arisen since the uprising of the Easterlin Paradox phenomenon. Besides its populous side, the urban area has more complicated problems than rural. This research aims to analyze the determinants of happiness in urban Indonesia. We use the latest data from the Happiness Measurement Survey 2017 conducted by the BPS-Statistic Agency of Indonesia. Taking 30,665 observations, we apply the Ordered Logit Estimation technique (including G2-likelihood ratio test, Wald statistical test, and Hosmer-Lemeshow goodness of fit test) to analyze the determinants of happiness. We found that Easterlin Paradox does not exist in urban area Income, education, health, marrying, internal-external relationship, a satisfying job, positive feeling, and a meaningful life have a positive impact on happiness. Generally, these findings support some previous studies' findings.

Environmental pollution, income growth, and subjective well-being: regional and individual evidence from China.

The study of subjective well-being (SWB) has attracted considerable attention from scholars globally. This has stimulated numerous studies that have identified regional and individual factors associated with SWB, but the extant research lacks multi-level studies that simultaneously examine their influence on SWB. Environmental pollution is one of such factors, but few studies have investigated its effect on SWB in China particularly. The current study addressed these problems by conducting hierarchical linear regressions to explore the effects of regional and individual factors on Chinese people's SWB. Three major environmental pollutions (wastewater pollution, domestic waste pollution, and air pollution) were studied using data from the Chinese General Social Survey 2013 and China Statistical Yearbook 2014. The results indicated that wastewater pollution and domestic waste pollution had significant negative influence on SWB. Moreover, gross domestic product (GDP) per capita might contribute more to the improvement of SWB than income inequality. This implies that individuals' SWB might be enhanced by improving absolute income, which is consistent with the micro-level proposition of the Easterlin paradox. Overall, these findings signal that effective management of environmental pollution is essential for promoting the SWB of the people in China.

Survey Evidence on Habit Formation: Existence, Specification, and Implication

Habit formation is a staple of macroeconomics and finance, but insufficient micro evidence has led to controversies over its existence, specification, and implication. This paper documents new and extensive micro evidence for habit formation, through survey experiments eliciting ten preference parameters informative about habit formation. The evidence suggests that habit forms both internally and externally, depreciates by around two-thirds annually, and has an about equisized welfare impact as peer effect. I also propose and implement four tests of additive and multiplicative habits and find that these ubiquitous preferences are rejected. Evidence-based simulations show that combining habit formation with peer effect could explain the Easterlin paradox.

ВИМІРИ ЩАСТЯ В УНІВЕРСИТЕТІ В КОНТЕКСТІ ЕКОНОМІКИ ЩАСТЯ

Описано теоретичні і методологічні підходи до визначення та виміру економіки щастя. Теоретичне підгрунтя економіки щастя передбачає дослідження економічних та інших факторів, що визначають людське щастя, його залежності від рівня економічного розвитку країни і визначення параметрів оцінки рівня щастя суспільства в цілому. Висвітлено «парадокс Істерліна», що зазначає обмеженість впливу економічного зростання на рівень щастя громадян. Економіка щастя на макрорівні обумовлена щастям на мікрорівнях, у нашому дослідженні — в Університеті. Його метою було визначення рівня і вимірювання чинників щастя та їхнього впливу з урахуванням сучасних мережевих комунікацій напродуктивність і творчість студентів та викладачів ЗВО. Наведено результати дослідження 323-х студентів і викладачів різних ВНЗ України, опитаних за допомогою хмарної анкети, створеної за допомогою Google Form. Результати дослідження засвідчили, що більшість студентів і викладачів задоволені життям у ЗВО, вважають, що чинниками щастя є матеріальні, духовні та суспільні блага разом. Доведено, що молоді люди загалом щасливіші, аніж старші, оцінюють свій рівень щастя щодо своєї ролі в Університеті на «4» (за 5-бальною шкалою). Показано, що майже половина респондентів нераціонально використовують свій час у мережі «Інтернет», але їх це влаштовує; більша частина досліджуванихпочувалися б щасливіше, якби максимально продуктивно використовували свій час і мали змогу більше витрачати часу на саморозвиток і творчість.

Easterlin-paradox: a revisionist account for the enlightened politician

ABSTRACT Social scientists have engaged extensively with the empirical findings of the Easterlin-paradox. However, any statement regarding the meaning and implications of the paradox are derived only through the mediation of normative assumptions. The paper renders these assumptions explicit (and, therefore, open for political discussion), a necessary step in legitimizing the Easterlin paradox as a compass for politics. Based on the analysis of the assumptions lurking behind the common implications of the paradox, the paper opens the door to alternative implications of the paradox. Thus, it refers to other normative assumptions that combine together the assumptions discussed - and is therefore regarded as pluralist in essence - and singles out one particular strong variant - the ‘dual necessity’ variant. This strong assumption, invariably overlooked in the literature, is defined here and its significant political implications for the Easterlin paradox illustrated.

The Easterlin Paradox

The Easterlin Paradox states that at a point in time happiness varies directly with income, both among and within nations, but over time the long-term growth rates of happiness and income are not significantly related. The principal reason for the contradiction is social comparison. At a point in time those with higher income are happier because they are comparing their income to that of others who are less fortunate, and conversely for those with lower income. Over time, however, as incomes rise throughout the population, the incomes of one's comparison group rise along with one's own income and vitiates the otherwise positive effect of own-income growth on happiness. Critics of the Paradox mistakenly present the positive relation of happiness to income in cross-section data or in short-term time fluctuations as contradicting the nil relation of long-term trends.

Perceived Air Pollution，Income and Happiness

The American economist Easterlin put forward the famous Easterlin Paradox” in a study on happiness in 1974. It is said that higher income is not systematically accompanied by greater happiness. In other words, in the early stages of economic growth, people’s happiness will increase significantly with the increase of income level; after the income growth reaches a certain level, people’s happiness may decrease with the increase of income level. Since then, many studies have explained this phenomenon from the perspective of relative income and missing variables. In the past, most countries’ development experiences have shown that sacrificing the environment in exchange for economic growth is more common in many regions. Therefore, many scholars use the environmental quality as an important factor in the theory of missing variables to explain the Easterlin Paradox”.Unlike most previous studies, this paper distinguishes air pollution from measured air pollution and perceived air pollution. Perceived air pollution is an individual’s subjective assessment of atmospheric environment. Under the same environment, different individuals may have different sensitivity to air pollution. Psychology research shows that the direct impact on people’s happiness is the subjective feeling of air pollution, that is, perceived air pollution. Based on the perspective of environmental pollution sensitivity, this paper uses the 2016 China Labor Dynamics Survey data from Sun Yat-sen University to explore the impact of income on residents’ perceived air pollution, and further analyzes the heterogeneity of residents’ perceived air pollution on happiness, providing a new possible explanation for the Easterlin Paradox”.It comes to the following conclusions: First, the sensitivity to the environmental pollution of residents at different income levels is different. High-income people are more sensitive to air pollution. Second, the higher the income level of residents, the greater the negative impact of environmental pollution on residents’ happiness. It is found through calculations that high-income people will offer higher willingness-to-pay to improve air quality, while low-income people or residents in poverty levels are even willing to sacrifice the environment in exchange for income growth.The conclusion of this paper reminds us that in the process of environmental pollution control, it should be recognized that the environmental requirements of different groups are different. It is available to improve environmental quality and increase the income of the poor at the same time if the ecological compensation mechanism between developed regions and backward regions can be rational designed, so as to realize the Pareto improvement of the welfare of the whole society.The main contributions of this paper are: （1）making a further research on happiness; （2）analyzing the subjective feelings of different income groups on air pollution and their impact on happiness, and providing a new interpretation of the Easterlin Paradox” from the perspective of perceived air pollution; （3）effectively avoiding sample selective bias and making the results more reliable by using more comprehensive and nationally representative city-level air quality data.

한국에서의 사회적자본과 주민행복

Korean society has achieved remarkable economic growth, however when income reaches a certain level and basic needs are met, it does not proportionally increase happiness cognition, as it can be seen in Easterlin's paradox. Therefore, we should consider complementary factor such as fairness to enhance the level of residents’ satisfaction. Fairness theory explains the motivational effects of perceived imbalances in the exchange process, and people subconsciously compare the proportion of perceived input and output. In addition, communication perform a role as a medium in the conscious process because it can be a essential criterion on evaluation. We finds many results of the precedent analysis have investigated that fairness judgement has a direct and indirect effect on value evaluation. but the role of communication is not well-defined in that process. This study tried to analyze the mediating effect of communication on the relationship between the fairness and the residents' happiness awareness. Recognizing fairness may be a very important factor in this process and mediating effect of communication is identified simultaneously. Therefore, it is important not to make policy reflected effects of fairness but to make public program considering communication for residents’ happiness in the future.

Positional Competition: A Theory of the Great Gatsby Curve and the Easterlin Paradox

This paper provides a novel theory that simultaneously explains the Great Gatsby curve and the Easterlin paradox, demonstrating that these two phenomena could be driven by the same mechanism. I model positional competition, in which production opportunities are allocated according to relative performance, as a Nash equilibrium outcome of agents reacting optimally to a distribution of production opportunities. Positional competition is not a zero-sum game and its intensity is endogenously determined. The distribution of income and intergenerational mobility are also endogenously determined, with income following a power law distribution. As productivities become more dispersed, optimizing agents respond by competing more intensely with each other. This endogenous intensification lies at the heart of my explanation for both the Great Gatsby curve and the Easterlin paradox.

Determinants of Well-being for Developing and Developed Countries and their Role in Policy-making: A Panel Data Analysis

The gross domestic product has been the traditional indicator used to measure economic growth, with almost every country having national policies that are growth-centric in nature. Underlying this practice is the assumption that higher income levels precede higher levels of utility, or well-being. However, the Easterlin paradox discovered by Easterlin in the 1970s contradicts this economic assumption and has subsequently ignited interest in the study of subjective well-being and its determinants. Using the countries’ responses to the life satisfaction question in the World Values Survey as the measure of subjective well-being over a period of time, this study utilises panel data techniques to identify the key determinants of life satisfaction for developing and developed countries. The study also determines the relative importance of these key determinants for the two groups of countries. The findings of this study show that the determinants of life satisfaction differ across developed and developing countries, with religiosity being the only common determinant. The policy implications of these findings are discussed.

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

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.

Older Adults’ Mental Health in China: Examining the Relationship Between Income Inequality and Subjective Wellbeing Using Panel Data Analysis

Although people in China are experiencing rapid economic growth, higher income, and better living standards, the level of subjective wellbeing has not risen correspondingly. According to the ‘Easterlin Paradox’, economic growth does not necessarily bring about improvement in wellbeing, because an important part of happiness comes from making comparisons. This study investigates the relationship between income inequality and subjective wellbeing in China, focusing on older adults between 60 and 90 years. Empirical evidence is drawn from the Chinese Health and Nutrition Survey 2006, 2009, and 2011 waves. Using county-level fixed-effects estimation, the analyses show that generally, income inequality is negatively associated with subjective wellbeing, net of individual income. The association between inequality and wellbeing varies between people with rural or urban household registration status, and between people ranked within different income deciles. The association between inequality and wellbeing is stronger for people with urban household registration status, and for people ranked within higher income deciles.

Subjective Perceptions of Poverty and Objective Economic Conditions: Czechia and Slovakia a Quarter Century After the Dissolution of Czechoslovakia

Studies into the relation between subjective perceptions of individuals and objective economic conditions have usually resulted in ambiguous empirical findings. Whilst most studies perceive subjective welfare as being operationalized by indicators of happiness or life satisfaction, we narrow the approach to an economic domain of subjective well-being—perceptions of poverty. We argue that our approach better reflects the economic dimension, as the former may include numerous non-economic domains. We use a case study of two countries—Czechia and Slovakia—which underwent early economic transition as a common state in 1989–1992, then became independent states in 1993, after the dissolution of Czechoslovakia. We base our findings on three historical data sets covering a period from around the end of the communist era to the early years after the split, and recent data from EU Statistics on Income and Living Conditions (2005–2016). Despite initially small differences in subjective poverty levels in socialist Czechoslovakia, a considerably larger drop in economic performance during the transition period in Slovakia than in Czechia resulted in a sharp widening of the subjective poverty gap. The recent data suggests that, despite a high degree of actual economic convergence of Slovakia and Czechia, the gap in subjective perceptions of poverty is declining at a remarkably slower pace. We argue that relatively fast economic growth is not necessarily associated with a commensurate decline in subjective poverty perceptions. Our results thus support the Easterlin Paradox, although we substitute happiness by an economic dimension of subjective well-being.

The Happiness-Energy Paradox: Energy Use is Unrelated to Subjective Well-Being

Earth’s per capita energy use continues to grow, despite technological advances and widespread calls for reduction in energy consumption. The negative environmental consequences are well known: resource depletion, pollution, and global warming. However many remain reluctant to cut energy consumption because of the widespread, although, implicit, belief that a nation’s well being depends on its energy consumption. This article systematically examines the evidential support for the relationship between energy use and subjective well-being at the societal level, by integrating data from multiple sources, collected at multiple levels of government, and spanning four decades. This analysis reveals, surprisingly, that the most common measure of subjective well-being, life satisfaction, is unrelated to energy use -- whether measured at the national, state or county level. The nil relationship between happiness and energy use is reminiscent of the well-known Easterlin Paradox, however the causal mechanisms responsible to each remain in question. We discuss the possible causes for the Happiness-Energy paradox and potential policy implications.

The Effects of Income on Happiness in East and South Asia: Societal Values Matter?

During the last two decades, economic studies on happiness have grown rapidly in particular, studies on the effect of income on happiness. Ng (Pac Econ Rev 7(1):51–63, 2002) has highlighted the East-Asian happiness gap. The East Asian countries, China, Hong Kong, Taiwan, Korea, Japan, Singapore, are performing well economically, however, performing poorly in happiness. Societal values have been suggested to be the potential explanation of this happiness gap. Nevertheless, the effects of societal values on happiness are yet to be explored fully. This paper aims to estimate the effect of income on happiness and examine the moderating effect of societal values in the context of the East-Asian happiness gap using the World Values Survey (WVS) data. The WVS (waves 6, 2010–2014) consists of nationally representative sample of 14,447 respondents from the various East and South Asian countries. It provides measurements of societal values, subjective well-being and other socio-demographic variables including income. We found that the effect of income on happiness is the lowest (and insignificant) in Thailand and Philippines; and the highest (and strongly significant) in South Korea and Taiwan. The effect of income becomes insignificant once it is moderated by the societal values. Societal values matter to explain the East-Asian happiness gap and might refute the relevance of Easterlin paradox.

Gross National Happiness and Macroeconomic Indicators in the Kingdom of Bhutan

This paper examines the origins and use of the concept of Gross National Happiness (or subjective well-being) in the Kingdom of Bhutan, and the relationship between measured well-being and macroeconomic indicators. While there are only a few national surveys of Gross National Happiness in Bhutan, the concept has been used to guide public policymaking for the country's various Five-Year Plans. Consistent with the Easterlin Paradox, available evidence indicates that Bhutan's rapid increase in national income is only weakly associated with increases in measured levels of well-being. It will be important for Bhutan to undertake more frequent Gross National Happiness surveys and evaluations, to better build evidence for comovement of well-being and macroeconomic concepts such as real national income.

Economic growth and subjective well-being: analyzing the formative mechanism of Easterlin Paradox

In this paper, we investigate the formative mechanism of the Easterlin paradox in China using 2010 Chinese General Social Survey (CGSS) data. By establishing a multi-factor, multi-level dynamic framework, we unveil the formative mechanism of the Easterlin paradox. The impact of multiple factors on subjective well-being and the influence of micro-level individual factors conditional on macro-economic development were analyzed. We find that with economic growth, on the one hand, material needs upgraded to enjoyment needs, and the return to well-being from material conditions decreased. On the other hand, the intensity of social inequality triggered relative deprivation, offsetting the return from economic growth. Therefore, subjective well-being stagnated, instead of increasing with economic growth.

Why Do Advantaged People Feel Unhappy? Effects of Materialistic Values on Subjective Well-Being

This article aims to explore the relationship between income and happiness. As shown by the Easterlin paradox, the relationship between income and happiness is not simple but indeed is rather complicated. The author used finite mixtures of regression models to analyze the data from the National Survey of Social Stratification and Social Mobility conducted in Japan and implemented computer simulations based on the results of the finite mixtures of regression models to examine how changes in social values influence the relationship between income and happiness. Analytical results revealed that people can be categorized into two latent classes: one dominated by materialistic values and the other eschewing materialistic values. Moreover, they clarified that materialistic values have ambivalent influences on individual happiness and average happiness in society. It is concluded that the diffusion of materialistic values might cause paradoxical relationships between income and happiness.

Have Econometric Analyses of Happiness Data Been Futile? A Simple Truth About Happiness Scales

Econometric analyses in the happiness literature typically use subjective well-being (SWB) data to compare the mean of observed or latent happiness across samples. Recent critiques show that com-paring the mean of ordinal data is only valid under strong assumptions that are usually rejected by SWB data. This leads to an open question whether much of the empirical studies in the economics of happiness literature have been futile. In order to salvage some of the prior results and avoid future issues, we suggest regression analysis of SWB (and other ordinal data) should focus on the median ra-ther than the mean. Median comparisons using parametric models such as the ordered probit and logit can be readily carried out using familiar statistical softwares like STATA. We also show a previously as-sumed impractical task of estimating a semiparametric median ordered-response model is also possi-ble by using a novel constrained mixed integer optimization technique. We use GSS data to show the famous Easterlin Paradox from the happiness literature holds for the US independent of any paramet-ric assumption.