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Does Money Buy Happiness? A Longitudinal Study Using Data on Windfalls

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Author Info
Gardner, Jonathan (University of Warwick)
Andrew Oswald

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Abstract

The most fundamental idea in economics is that money makes people happy. This paper constructs a test. It studies longitudinal information on the psychological health and reported happiness of approximately 9,000 randomly chosen people. In the spirit of a natural experiment, the paper shows that those in the panel who receive windfalls -- by winning lottery money or receiving an inheritance -- have higher mental wellbeing in the following year. A windfall of 50,000 pounds (approximately 75,000 US dollars) is associated with a rise in wellbeing of between 0.1 and 0.3 standard deviations. Approximately one million pounds (1.5 million dollars), therefore, would be needed to move someone from close to the bottom of a happiness frequency distribution to close to the top. Whether these happiness gains wear off over time remains an open question.

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Publisher Info
Paper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2002 with number 81.

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Date of creation: 29 Aug 2002
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Handle: RePEc:ecj:ac2002:81

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Web page: http://www.res.org.uk/society/annualconf.asp
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  1. Binder, Martin & Broekel, Tom, 2008. "Conversion Efficiency as a Complementing Measure of Welfare in Capability Space," MPRA Paper 7583, University Library of Munich, Germany. [Downloadable!]
  2. Vendrik,Maarten & Hirata,Johannes, 2003. "Experienced versus Decision Utility of Income: Relative or Absolute Happiness," Research Memoranda 054, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization. [Downloadable!]
  3. Gardner, Jonathan & Oswald, Andrew J., 2006. "Money and Mental Wellbeing : A Longitudinal Study of Medium-Sized Lottery Wins," The Warwick Economics Research Paper Series (TWERPS) 754, University of Warwick, Department of Economics. [Downloadable!]
    Other versions:
  4. Namkee Ahn & Juan Ramón García, . "Job Satisfaction in Europe," Working Papers 2004-16, FEDEA. [Downloadable!]
  5. Rafael Di Tella & Robert MacCulloch, 2008. "Happiness Adaptation to Income beyond "Basic Needs"," NBER Working Papers 14539, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Bruno Frey & Alois Stutzer, 2001. "What Can Economists Learn from Happiness Research?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  7. Claudia Senik, 2003. "What Can we Learn from Subjective Data ? The Case of Income and Well-Being," DELTA Working Papers 2003-06, DELTA (Ecole normale supérieure), revised Oct 2003. [Downloadable!]
  8. Rafael Di Tella & Robert MacCulloch, 2005. "Gross National Happiness as an Answer to the Easterlin Paradox?," Macroeconomics 0504027, EconWPA. [Downloadable!]
    Other versions:
  9. Mark Lutter, 2007. "Book Review: Winning a lottery brings no happiness!," Journal of Happiness Studies, Springer, vol. 8(1), pages 155-160, March. [Downloadable!] (restricted)
  10. Geeta Kingdon & John Knight, 2004. "Well-being poverty versus income poverty and capabilities poverty?," Development and Comp Systems 0409040, EconWPA. [Downloadable!]
  11. Jonathan Gruber & Sendhil Mullainathan, 2005. "Do Cigarette Taxes Make Smokers Happier," Advances in Economic Analysis & Policy, Berkeley Electronic Press, vol. 5(1), pages 1412-1412. [Downloadable!] (restricted)
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  12. Maximo Rossi & Marisa Bucheli, 2004. "The level of satisfaction with life: evidence gathered among women from Greater Montevideo," Microeconomics 0407012, EconWPA. [Downloadable!]
  13. Boes, Stefan & Winkelmann, Rainer, 2004. "Income and Happiness: New Results from Generalized Threshold and Sequential Models," IZA Discussion Papers 1175, Institute for the Study of Labor (IZA). [Downloadable!]
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  14. David G. Blanchflower & Andrew J. Oswald, 2004. "Money, Sex, and Happiness: An Empirical Study," NBER Working Papers 10499, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  15. Geeta Kingdon & John Knight, 2006. "Subjective well-being poverty vs . Income poverty and capabilities poverty?," The Journal of Development Studies, Taylor and Francis Journals, vol. 42(7), pages 1199-1224, October. [Downloadable!] (restricted)
  16. Claudia Senik, 2002. "Que nous apprennent les données subjectives ? Une application au lien entre revenu et bien-être," DELTA Working Papers 2002-20, DELTA (Ecole normale supérieure). [Downloadable!]
  17. Daniel S. Hamermesh, 2004. "Subjective Outcomes in Economics," NBER Working Papers 10361, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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