Journal of Happiness Studies

, Volume 18, Issue 1, pp 199–228 | Cite as

Life Satisfaction and Keeping Up with Other Countries

  • Ozan EksiEmail author
  • Neslihan Kaya
Research Paper


Micro income studies show that relative income of individuals—with respect to their colleagues, friends, etc.—affects their life satisfaction significantly. This paper attempts to extend these studies by using the idea that people may compare their well-being not only to well-being of their home country folks but also to well-being of other country citizens. Using data from national surveys of 55 countries, carried out from 1973 to 2011, we find that average life satisfaction of a country is significantly affected from how much that country is deprived of income compared to richer countries in the world. Furthermore, per capita income of a country only matters as far as it affects its relative position in the global income distribution. This result, gaining statistical significance after 1990s, is a potential explanation for the paradox that even though richer countries tend to be happier compared to poor ones, a country does not necessarily get happier as its income increases.


Life satisfaction Relative deprivation Global comparison groups 

JEL Classification

I31 O57 Z13 


  1. Alesina, A., Di Tella, R., & MacCulloch, R. (2004). Inequality and happiness: Are Europeans and Americans different? Journal of Public Economics, 88, 2009–2042.CrossRefGoogle Scholar
  2. Arellano, M., & Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. Review of Economic Studies, 58(2), 277–297.CrossRefGoogle Scholar
  3. Bjørnskov, C., Dreher, A., & Fischer, J. A. V. (2007). Cross-country determinants of life satisfaction: Exploring different determinants across groups in society. Social Choice and Welfare, 30(1), 119–173.CrossRefGoogle Scholar
  4. Bossert, W., & D’Ambrosio, C. (2006). Reference groups and individual deprivation. Economics Letters, 90(3), 421–426.CrossRefGoogle Scholar
  5. Brickman, P., & Campbell, D. T. (1971). Hedonic relativism and planning the good society. In M. H. Apley (Ed.), Adaptation-level theory: A symposium. New York: Academic Press.Google Scholar
  6. Brockmann, H., Delhey, J., Welzel, C., & Yuan, H. (2009). The China puzzle: Falling happiness in a rising economy. Journal of Happiness Studies, 10(4), 387–405.CrossRefGoogle Scholar
  7. Choi, I. (2001). Unit root tests for panel data. Journal of International Money and Finance, 20, 249–272.CrossRefGoogle Scholar
  8. Clark, A. E., Frijters, P., & Shields, M. A. (2008). Relative income, happiness, and utility: An explanation for the Easterlin paradox and other puzzles. Journal of Economic Literature, 46(1), 95–144.CrossRefGoogle Scholar
  9. Clark, A. E., Masclet, D., & Villeval, M. C. (2010). Effort and comparison income: Experimental and survey evidence. Industrial and Labor Relations Review, 63(3), 407–426.CrossRefGoogle Scholar
  10. Clark, A. E., & Oswald, A. J. (1996). Satisfaction and comparison income. Journal of Public Economics, 61, 359–381.CrossRefGoogle Scholar
  11. Czaika, M., & De Haas, H. (2011). The role of internal and international relative deprivation in global migration. Oxford Development Studies, 40(4), 423–442.CrossRefGoogle Scholar
  12. Deaton, A. (2008). Income, health and well-being around the world: Evidence from the Gallup World Poll. Journal of Economic Perspectives, 22(2), 53–72.CrossRefGoogle Scholar
  13. Deininger, K. W., & Squire, L. (1996). A new data set measuring income inequality. World Bank Economic Review, 10(3), 565–591.CrossRefGoogle Scholar
  14. Delhey, J., & Kohler, U. (2006). From nationally bounded to Pan-European inequalities? On the importance of foreign countries as reference groups. European Sociological Review, 22(2), 125–140.CrossRefGoogle Scholar
  15. Di Tella, R., & MacCulloch, R. J. (2008). Gross national happiness as an answer to the Easterlin paradox? Journal of Development Economics, 86(1), 22–42.CrossRefGoogle Scholar
  16. Di Tella, R., MacCulloch, R. J., & Oswald, A. J. (2003). Macroeconomics of happiness. The Review of Economics and Statistics, 85(4), 809–827.CrossRefGoogle Scholar
  17. Dreher, A. (2006). Does globalization affect growth? Evidence from a new Index of globalization. Applied Economics, 38(10), 1091–1110.CrossRefGoogle Scholar
  18. Easterlin, R. A. (1974). Does economic growth improve the luman lot? Some empirical evidence. In P. A. David & M. W. Reder (Eds.), Nations and households in economic growth. New York: Academic Press.Google Scholar
  19. Easterlin, R. A. (1995). “Will raising the incomes of all increase the happiness of all? Journal of Economic Behavior & Organization, 27, 35–47.CrossRefGoogle Scholar
  20. Easterlin, R. A. (2005). Diminishing marginal utility of income? Caveat emptor. Social Indicators Research, 70(3), 243–255.CrossRefGoogle Scholar
  21. Easterlin, R. A., & Sawangfa, O. (2010). Happiness and economic growth: Does the cross section predict time trends? Evidence from developing countries. In E. Diener, J. Helliwell, & D. Kahneman (Eds.), International differences in well-being. Oxford: Oxford University Press.Google Scholar
  22. Ebert, U., & Moyes, P. (2000). An axiomatic characterization of Yitzhaki’s index of individual deprivation. Economics Letters, 68(3), 263–270.CrossRefGoogle Scholar
  23. Ferrer-i-Carbonell, A. (2005). Income and well-being: An empirical analysis of the comparison income effect. Journal of Public Economics, 89(5–6), 997–1019.CrossRefGoogle Scholar
  24. Fisher, R. A. (1932). Statistical method for research workers (4th ed.). Edingurgh: Oliver and Boyd.Google Scholar
  25. Frey, B., & Stutzer, A. (2002). What can economists learn from happiness research? Journal of Economic Literature, 40(2), 402–435.CrossRefGoogle Scholar
  26. Gardner, J., & Oswald, A. J. (2007). Money and mental wellbeing: A longitudinal study of medium-sized lottery wins. Journal of Health Economics, 26(1), 49–60.CrossRefGoogle Scholar
  27. Giavazzi, F., & Tabellini, G. (2005). Economic and political liberalizations. Journal of Monetary Economics, 52(7), 1297–1330.CrossRefGoogle Scholar
  28. Goodman, P. S. (1974). An examination of referents used in the evaluation of pay. Organizational Behavior and Human Performance, 12, 170–195.CrossRefGoogle Scholar
  29. Graham, C., & Felton, A. (2006). Inequality and happiness: Insights from Latin America. Journal of Economic Inequality, 4(1), 107–122.CrossRefGoogle Scholar
  30. Inglehart, R. (1997). Modernization and postmodernization: cultural, economic and political change in 43 societies. Princeton, NJ: Princeton University Press.Google Scholar
  31. Layard, R. (2005). Happiness: Lessons from a new science. London: Penguin Books.Google Scholar
  32. Macunovich, D. J. (2011). A note on inequality aversion across countries, using two new measures. IZA Discussion Paper, no. 5734.Google Scholar
  33. Maddala, G. S., & Wu, S. (1999). A comparative study of unit root tests with panel data and a new simple test. Oxford Bulletin of Economics and Statistics, 61, 631–652.CrossRefGoogle Scholar
  34. McBride, M. (2001). Relative-income effects on subjective well-being in the cross-section. Journal of Economic Behavior & Organization, 45(3), 251–278.CrossRefGoogle Scholar
  35. Ostroot, N. M., & Snyder, W. W. (1985). Measuring cultural bias in a cross-national study. Social Indicators Research, 17, 234–251.CrossRefGoogle Scholar
  36. Owen, A. L., Videras, J., & Willemsen, C. (2008). Democracy, participation, and life satisfaction. Social Science Quarterly, 89(4), 987–1005.CrossRefGoogle Scholar
  37. Rizzo, J. A., & Zeckhauser, R. (2003). Reference incomes, loss aversion, and physician behavior. Review of Economics and Statistics, 85, 909–922.CrossRefGoogle Scholar
  38. Rözer, J., & Kraaykamp, G. (2013). Income inequality and subjective well-being: A cross-national study on the conditional effects of individual and national characteristics. Social Indicators Research, 113, 1009–1023.CrossRefGoogle Scholar
  39. Runciman, W. G. (1966). Relative deprivation and social justice. Berkeley: University of California Press.Google Scholar
  40. Sági, M. (2012). Determinants of satisfaction with living standards in transition societies. International Journal of Sociology, 41(4), 55–78.CrossRefGoogle Scholar
  41. Senik, C. (2008). Ambition and jealousy: Income interactions in the ‘old’ Europe versus the ‘new’ Europe and the United States. Economica, 75(299), 495–513.CrossRefGoogle Scholar
  42. Senik, C. (2009). Direct evidence on income comparisons and their welfare effects. Journal of Economic Behavior & Organization, 72, 408–424.CrossRefGoogle Scholar
  43. Stark, O., & Hyll, W. (2011). On the economic architecture of the workplace: Repercussions of social comparisons among heterogeneous workers. Journal of Labor Economics, 29(2), 349–375.CrossRefGoogle Scholar
  44. Stark, O., & Yitzhaki, S. (1988). Labour migration as a response to relative deprivation. Journal of Population Economics, 1(1), 57–70.CrossRefGoogle Scholar
  45. Stevenson, B., & Wolfers, J. (2008). Economic growth and subjective well-being: Reassessing the Easterlin paradox. Brookings Papers on Economic Activity, 39(1), 1–102.CrossRefGoogle Scholar
  46. Stutzer, A. (2004). The role of income aspirations in individual happiness. Journal of Economic Behavior & Organization, 54(1), 89–109.CrossRefGoogle Scholar
  47. Veenhoven, R. (1994). Is happiness a trait? Tests of the theory that a better society does not make people any happier. Social Indicators Research, 32, 101–160.CrossRefGoogle Scholar
  48. Veenhoven, R. (2007). Healthy happiness: Effects of happiness on physical health and the consequences for preventive health care. Journal of Happiness Studies, 9(3), 449–469.CrossRefGoogle Scholar
  49. Veenhoven, R., & Hagerty, M. (2006). Rising happiness in nations 1946–2004: A reply to Easterlin. Social Indicators Research, 79, 421–436.CrossRefGoogle Scholar
  50. Winkelmann, L., & Winkelmann, R. (2010). Does inequality harm the middle class? Kyklos, 63(2), 301–316.CrossRefGoogle Scholar
  51. Yitzhaki, S. (1979). Relative deprivation and the Gini coefficient. The Quarterly Journal of Economics, 93(2), 321–324.CrossRefGoogle Scholar
  52. Zizzo, D. J., & Oswald, A. J. (2001). Are people willing to pay to reduce others’ incomes? Annales d’Economie et de Statistique, 63–64, 39–65.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media Dordrecht 2016

Authors and Affiliations

  1. 1.Department of EconomicsTOBB University of Economics and TechnologyAnkaraTurkey
  2. 2.Research and Monetary Policy DepartmentCentral Bank of the Republic of TurkeyAnkaraTurkey

Personalised recommendations