Applied Research in Quality of Life

, Volume 6, Issue 3, pp 219-239

First online:

Does More Money Make You Happier? Why so much Debate?

  • Carol GrahamAffiliated withThe Brookings Institution, University of Maryland Email author 

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Easterlin’s famous paradox questioned standard economic assumptions about a fundamental relationship in economics: that between happiness and income. In recent years there has been renewed debate about the paradox. In this essay, I highlight some of the methodological issues and challenges underlying that debate. I focus on the sensitivity of the results to the method selected, the choice of micro or macro data, and the way that happiness questions are defined and framed, all of which result in divergent conclusions. I also note the mediating role of the pace and nature of economic growth, institutional frameworks, and inequality. What is most notable is the remarkable consistency in the determinants of individual happiness – including income – within countries of diverse income levels and, at the same time, how happiness is affected by cross-country differences that are related to average per-capita income levels, such as political freedom and public goods. Income clearly plays a role in determining both individual and country level happiness. Still, assessing its role relative to other more difficult to measure factors as countries develop in new ways and at different rates will remain a challenge for the foreseeable future.


Happiness Income Quality of life Well-being Adaptation