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Does consumption buy happiness? Evidence from the United States

Abstract

We examine the association between various components of consumption expenditure and happiness in the Health and Retirement Study (HRS), a nationally representative sample of older Americans. We find that only one component of consumption is positively related to happiness—leisure consumption. In contrast, consumption of durables, charity, personal care, food, health care, vehicles, and housing are not significantly associated with happiness. Second, we find that leisure consumption is associated with higher levels of happiness partially through its effect on social connectedness, as indexed by measures of loneliness and embeddedness in social networks. On one hand, these results counter the conventional wisdom that “material goods can’t buy happiness.” One the other hand, they underscore the importance of social goods and social connectedness in the production of happiness.

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Notes

  1. 1.

    In this paper we will also use these terms interchangeably.

  2. 2.

    In particular, we replace missing values for the consumption variables with the mean values for the sample. In all specifications, we also include a set of dummy variables indicating whether each consumption variable was imputed. In this way, we allow the relationship between happiness and consumption to differ between those with imputed and non-imputed consumption data.

  3. 3.

    The values of \( R_{j}^{2} \) for the consumption variables are: durables (0.13), utilities (0.14), health care (0.11), leisure (0.58), food at home (0.29), food away from home (0.33), charity and gifts (0.40), personal care (0.28), and vehicles (0.17).

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Acknowledgments

The authors thank Milo Bianchi and participants at the 2009 Conference on Happiness and Relational Goods, held in Venice, Italy for helpful comments. We also thank Jen-Hao Chen for excellent research assistance.

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Correspondence to Thomas DeLeire.

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DeLeire, T., Kalil, A. Does consumption buy happiness? Evidence from the United States. Int Rev Econ 57, 163–176 (2010). https://doi.org/10.1007/s12232-010-0093-6

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Keywords

  • Happiness
  • Leisure
  • Consumption

JEL Classification

  • D12
  • I31