Income growth and happiness: reassessment of the Easterlin Paradox

The paper presents evidence of a positive but very small long-run relationship between income growth and happiness. Such finding is usually presented as a refutation of the Easterlin Paradox. The paper, however, argues that what the evidence actually reveals is that income growth has very little impact in terms of increasing happiness over the long term. The paper, in turn, argues that a rejection of the Easterlin Paradox requires the evidence to indicate economic significance. That is, the magnitude of the estimated long-run relationship between income growth and happiness is the more appropriate yardstick for an evaluation of the Easterlin Paradox. Copyright Springer-Verlag Berlin Heidelberg 2014