effort imposes negative externalities on others (by shifting their reference points) and that these distortions would be best
corrected by higher taxes on income or consumption.
Evaluating these strong policy prescriptions demands a robust understanding of the true relationship between
income and well-being. Unfortunately, the present literature is based on fragile and incomplete evidence about this
relationship. At the time the Easterlin paradox was first identified, few data were available to allow an assessment of
subjective well-being across countries and through time. The difficulty of identifying a robust GDP-happiness link from
scarce data led some to confound the absence of evidence of such a link with evidence of its absence.
The ensuing years have seen an accumulation of cross-country data recording individual life satisfaction and
happiness. These recent data (and a reanalysis of earlier data) suggest that the case for a link between economic
development and happiness is quite robust. The key to our findings is a resolute focus on the magnitude of the subjective
well-being-income gradient estimated within and across countries at a point in time as well as over time, rather than its
statistical significance or insignificance.
Our key result is that the estimated subjective well-being-income gradient is not only significant but also
remarkably robust across countries, within countries, and over time. These comparisons between rich and poor members
of the same society, between rich and poor countries, and within countries through time as they become richer or poorer
all yield similar estimates of the well-being-income gradient. Our findings both put to rest the earlier claim that economic
development does not raise subjective well-being and undermine the possible role played by relative income comparisons.
These findings invite a sharp reassessment of the stylized facts that have informed economic analysis of
subjective well-being data. Across the world’s population, variation in income explains a sizable proportion of the
variation in subjective well-being. There appears to be a very strong relationship between subjective well-being and
income, which holds for both rich and poor countries, falsifying earlier claims of a satiation point at which higher GDP
per capita is not associated with greater well-being.
The rest of this paper is organized as follows. The first section provides some background on the measurement of
subjective well-being and economic analysis of these data. Subsequent sections are organized around alternative
measurement approaches to assessing the link between income and well-being. Thus, the second section compares
average well-being and income across countries. Whereas earlier studies focused on comparisons of small numbers of
industrialized countries, newly available data allow comparisons across countries at all levels of development. These
comparisons show a powerful effect of national income in explaining variation in subjective well-being across countries.
In the third section we confirm the earlier finding that richer people within a society are typically happier than their poorer
brethren. Because these national cross sections typically involve quite large samples, this finding is extremely statistically
significant and has not been widely disputed. However, Easterlin (1974) and others have argued strongly that the positive
relationship between income and subjective well-being within countries is much larger than that seen across countries.
This argument is not borne out by the data: the well-being-income gradient measured within countries is similar to that
measured between countries. The paper’s fourth section extends our analysis to assessing national time-series movements
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