Sunday, April 30, 2017

Easterlin (2016) Relocates the Seemingly Lost Paradox

Richard A. Easterlin, “Paradox Lost?” USC Dornsife Institute for New Economic Thinking, Working Paper No. 16-02, 2016.

• Easterlin’s version of the Paradox: At a given point in time, within a country, happiness is positively correlated with income, and furthermore, at a given point in time, richer countries are happier than poorer countries. That is, cross-section evidence suggests a positive association between income and happiness. Over time, however, happiness is not positively correlated with income. Paradox! But the time period in which the relationship between income and happiness collapses needs to be substantial: it is long trends in happiness and income that seem to be uncorrelated. 

• Over nearly 70 years, happiness trends in the US have been zero or slightly negative, despite per-capita income tripling. 

• Easterlin looks at countries with at least 1 million people, and that possess data from at least three Subjective Well-Being surveys, conducted over a period of at least ten years and one GDP cycle: 43 countries make the cut. He finds no significant relationship between growth and happiness in this panel data. 

• Some other researchers generate different answers because they look over shorter timespans. Transition countries, for example, tend to be included with only one phase of their transition cycle in the data, biasing results towards a positive connection between GDP and happiness.

Links to outlines of a few closely-related papers:

Betsey Stevenson and Justin Wolfers, “Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox.Brookings Papers on Economic Activity, pages 1-87, Spring 2008. 

Daniel W. Sacks, Betsey Stevenson and Justin Wolfers, “The New Stylized Facts About Income and Subjective Well-Being.Emotion 12(6): 1181- 1187, 2012.

Richard A. Easterlin, “Happiness, Growth, and Public Policy.” Economic Inquiry 51(1): 1–15, January 2013. 

Richard A. Easterlin, “Happiness and Economic Growth: The Evidence.” USC Dornsife Institute for New Economic Thinking, Working Paper No. 14-03, November 6, 2014.

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