How Income Affects Happiness
How Income Affects Happiness
This chapter examines three aspects of the relationship between happiness and income: whether individuals with high income at a given point in time are happier than those with low income, whether an increase in income over time increases happiness, and whether citizens of advanced industrial countries are happier than those in developing countries and transitional economies. Empirical evidence shows that richer people tend to report higher subjective well-being. The relationship between income and happiness is statistically (and normally highly) significant. The chapter also considers two main processes that shape individuals’ aspirations and account for the relativity in people’s utility evaluation: social comparisons and getting accustomed to new income or consumption levels.
Keywords: happiness, income, developing countries, well-being, utility, social comparisons, consumption
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