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in average well-being and income. Consistent time series measuring subjective well-being data are scarce, and the existing
data is noisy. These factors explain why past researchers have not found a link between economic growth and growth in
happiness. We reexamine three of the key case studies from previous research and find that a more careful assessment of
the experiences of Japan, Europe, and the United States does not undermine the claim of a clear link between economic
growth and happiness, a finding supported by repeated international cross-sections. Our point estimates suggest that the
link may be similar to that found in cross-country comparisons, although substantial uncertainty remains around these
estimates. The fifth section briefly explores alternative measures of well-being.

II. Some Background on Subjective Well-Being and Income

Our strategy in this paper is to use all of the important large-scale surveys now available to assess the relationship
between subjective well-being and happiness. These surveys typically involve questions probing happiness or life
satisfaction. The World Values Survey, for example, asks, “Taking all things together, would you say you are: very
happy; quite happy; not very happy; not at all happy?” and, “All things considered, how satisfied are you with your life as
a whole these days?” Other variants of the question, such as that in the Gallup World Poll, employ a ladder analogy:
interviewees are asked to imagine a ladder with each rung representing a successively better life. Respondents then report
the “step” on the ladder that best represents their life.

These questions (and many other variants) are typically clustered under the rubric of “subjective well-being”
(Diener, 2006, pp. 399-400).5 Although the validity of these measures remains a somewhat open question, a variety of
evidence points to a robust correlation between answers to subjective well-being questions and more objective measures
of personal well-being. For example, answers to subjective well-being questions have been shown to be correlated with
physical evidence of affect such as smiling, laughing, heart rate measures, sociability, and electrical activity in the brain
(Diener, 1984). Measures of individual happiness or life satisfaction are also correlated with other subjective assessments
of well-being such as independent evaluations by friends, self-reported health, sleep quality, and personality (Diener,
Lucas, and Scollon, 2006; Kahnman and Krueger, 2006). Subjective well-being is a function of both the individual’s
personality and his or her reaction to life events. One would therefore expect an individual’s happiness to be somewhat
stable over time, and accurate measurements of subjective well-being to have high test-retest correlations, which indeed
they do (Eid and Diener, 2006). Self-reports of happiness have also been shown to be correlated in the expected direction
with changes in life circumstances. For example, an individual’s subjective well-being typically rises with marriage and
income growth and falls while going through a divorce.

5 Diener suggests that “subjective well-being refers to all of the various types of evaluations, both positive and negative, that people
make of their lives. It includes reflective cognitive evaluations, such as life satisfaction and work satisfaction, interest and
engagement, and affective reactions to life events, such as joy and sadness. Thus, subjective well-being is an umbrella term for the
different valuations people make regarding their lives, the events happening to them, their bodies and minds, and the circumstances in
which they live.”



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