Happiness, income and poverty
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There is considerable evidence from a variety of sources to suggest that well-being is a function of relative income. These findings have been used to explain the Easterlin Paradox, whereby a rise in income for all does not lead to a rise in average happiness in a country (even though the cross section relationship between income and happiness is positive). This relativity of utility has led to calls for policy to focus away from GDP. I here first discuss some of the evidence that well-being is indeed relative in income, but then consider two relatively little-analysed issues to suggest that there may continue to be a role for GDP per capita in happiness-based policy: the inequality of subjective well-being, and the specific case of those in income poverty.
KeywordsHappiness Income Inequality Poverty
JEL ClassificationI31 D31
I am grateful to the Editor and an anonymous referee for useful suggestions. I thank Christopher Boyce, Conchita D’Ambrosio, Dick Easterlin and seminar participants at the AISSEC Workshop (Rome), the HEIRS Happiness Conference in Rome and Nanyang Technological University for help and useful comments. I am grateful for support from CEPREMAP, the US National Institute on Aging (Grant R01AG040640), the John Templeton Foundation and the What Works Centre for Wellbeing. Sarah Flèche kindly helped with the figures.
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Conflict of interest
The author declares that he has no conflict of interest.
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