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Gross National Happiness as an Answer to the Easterlin Paradox?

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Author Info
Rafael Di Tella (Harvard Business School)
Robert MacCulloch (Imperial College London)

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Abstract

The Easterlin Paradox refers to the fact that happiness data are typically stationary in spite of considerable increases in income. This amounts to a rejection of the hypothesis that current income is the only argument in the utility function. One possible answer is that human development involves more than current income (e.g., as argued by the UN). We find that the happiness responses of almost 400,000 people living in the OECD during 1975-97 are positively correlated with absolute income, the generosity of the welfare state and (weakly) with life expectancy; it is negatively correlated with the average number of hours worked, measures of environmental degradation (SOx emissions), crime, openness to trade, inflation and unemployment; all after controlling for country and year dummies. The estimated effects separate across groups in a manner that appears broadly plausible (e.g., the rich suffer environmental degradation more than the poor). Based on their actual change, the biggest contributors to happiness in our sample have been the increase in income and the increase in life expectancy. Our accounting exercise suggests that the unexplained trend in happiness is even bigger than would be predicted if income was the only argument in the utility function. In other words, introducing omitted variables worsens the income-without-happiness paradox.

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Paper provided by EconWPA in its series Macroeconomics with number 0504027.

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Length: 43 pages
Date of creation: 18 Apr 2005
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Handle: RePEc:wpa:wuwpma:0504027

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Related research
Keywords: income subjective well-being quality of life

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Find related papers by JEL classification:
D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
H00 - Public Economics - - General - - - General
I31 - Health, Education, and Welfare - - Welfare and Poverty - - - General Welfare
O00 - Economic Development, Technological Change, and Growth - - General - - - General
Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation

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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Stefano Bartolini & Ennio Bilancini & Maurizio Pugno, 2008. "Did the Decline in Social Capital Depress Americans’ Happiness?," Department of Economics University of Siena 540, Department of Economics, University of Siena. [Downloadable!]
  2. Georgios Kavetsos & Stefan Szymanski, 2008. "National Wellbeing and International Sports Events," Working Papers 0804, International Association of Sports Economists. [Downloadable!]
  3. Enrico A. Macelli & Richard A. Easterlin, . "Beyond Gender Differences in U.S. Life Cycle Happiness," Working Papers 2, University of Massachusetts Boston, Economics Department. [Downloadable!]
  4. Easterlin, Richard A. & Angelescu, Laura, 2009. "Happiness and Growth the World Over: Time Series Evidence on the Happiness-Income Paradox," IZA Discussion Papers 4060, Institute for the Study of Labor (IZA). [Downloadable!]
  5. André van Hoorn & Robbert Maseland, 2008. "Weber, Work Ethic And Well-Being," Papers on Economics of Religion 08/07, Department of Economic Theory and Economic History of the University of Granada.. [Downloadable!]
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