being-GDP gradient differs for rich and poor countries. It has been argued that income is particularly important for
happiness when the basic needs of food, clothing, and shelter are not being met, but that beyond this threshold happiness
is less strongly related to income. In its stronger form, this view posits a satiation point beyond which more income no
longer raises the happiness of a society. For instance, Layard claims that “if we compare countries, there is no evidence
that richer countries are happier than poorer ones—so long as we confine ourselves to countries with incomes over
$15,000 per head.... At income levels below $15,000 per head things are different....” (2005b, p. 149) Frey and Stutzer
offer a similar assessment of the literature, suggesting that “income provides happiness at low levels of development but
once a threshold (around $10,000) is reached, the average income level in a country has little effect on average subjective
well-being” (2002, p. 416).
Employing Layard’s cutoff, we find that the relationship between subjective well-being and log GDP per capita
is, if anything, stronger, rather than weaker, in the wealthier countries, although this difference is statistically significant
only in a few cases. The point estimates are, on average, about three as large for those countries with incomes above
$15,000 compared to those countries with incomes below $15,000.18 We thus find no evidence of a satiation point.
Indeed, a consistent theme across the multiple datasets shown in Table 1 and Figures 1-6 appears to be that there is a clear
positive relationship between subjective well-being and GDP per capita, even when the comparison is among developed
economies only.
The fact that the coefficient on log GDP per capita may be larger for rich countries should be interpreted
carefully. Taken at face value, the Gallup results suggest that a 1 percent rise in GDP per capita would have about three
times as large an effect on measured well-being in rich as in poor nations.19 Of course, a 1 percent rise in U.S. GDP per
capita is about ten times as large as a 1 percent rise in Jamaican GDP per capita. Consider instead, then, the effect of a
$100 rise in average incomes in Jamaica and the United States. Such a shock would raise log GDP per capita by ten times
more in Jamaica than in the United States, and hence would raise measured well-being by about three times as much in
Jamaica as in the United States. For the very poorest countries, this difference is starker. For instance, GDP per capita in
Burundi is about one-sixtieth that in the United States, and hence a $100 rise in average income would have a twenty-fold
larger impact on measured well-being in Burundi than in the United States.20
One explanation for the difference between our findings and earlier findings of a satiation point may be
differences in the assumed functional form of the relationship between well-being and GDP. In particular, whereas we
have analyzed well-being as a function of log GDP per capita, several previous analyses have focused on the absolute
18 This finding is consistent with Deaton (2008).
19 Higher income yields a larger rise in the happiness index, but not necessarily a larger rise in happiness, since we do not know the
“reporting function” that translates true hedonic experience into our measured well-being index (Oswald, forthcoming).
20 Using the Gallup World Poll data, we can check whether the log GDP-well-being gradient differs for the very poorest countries.
When restricting the sample to countries with GDP per capita below $3,000, we obtain estimates very similar to those for countries
with GDP per capita between $3,000 and $15,000. This is also evident in the nonparametric fit shown in Figure 4.
11