## Subjective well-being and income : a compromise between Easterlin paradox and its critiques

2018
Journal article
Published
##### Published in
Economics: The Open-Access, Open-Assessment E-Journal ; 12 (2018). - 43. - eISSN 1864-6042
##### Abstract
Despite rising popularity of subjective well-being (SWB) as a proxy for utility, its relationship with income is still unresolved. Against the background of debates around the ‘Easterlin paradox’, this paper seeks a compromise between two positions: one that insists on individual relative income, and one that finds similarity between individual and aggregate levels. Proposing a model which puts the emphasis on the interaction between individual and aggregate-level factors, it argues that the effect of relative income on SWB varies across countries as a function of average income, in addition to a relatively small direct effect of the latter, in partial agreement with the two major positions. The model is tested cross-sectionally on the data from the latest wave of World Values Survey. The results from hierarchical mixed-effect models confirm the main argument. But further examination reveals that there is still unaccounted variation especially in middle-income economies.
320 Politics
##### Keywords
Subjective well-being, Easterlin paradox, relative income, national income
##### Cite This
ISO 690YASAR, Rusen, 2018. Subjective well-being and income : a compromise between Easterlin paradox and its critiques. In: Economics: The Open-Access, Open-Assessment E-Journal. 12, 43. eISSN 1864-6042. Available under: doi: 10.5018/economics-ejournal.ja.2018-43
BibTex
@article{Yasar2018Subje-43054,
year={2018},
doi={10.5018/economics-ejournal.ja.2018-43},
title={Subjective well-being and income : a compromise between Easterlin paradox and its critiques},
volume={12},
journal={Economics: The Open-Access, Open-Assessment E-Journal},
author={Yasar, Rusen},
note={Article Number: 43}
}

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<dcterms:abstract xml:lang="eng">Despite rising popularity of subjective well-being (SWB) as a proxy for utility, its relationship with income is still unresolved. Against the background of debates around the ‘Easterlin paradox’, this paper seeks a compromise between two positions: one that insists on individual relative income, and one that finds similarity between individual and aggregate levels. Proposing a model which puts the emphasis on the interaction between individual and aggregate-level factors, it argues that the effect of relative income on SWB varies across countries as a function of average income, in addition to a relatively small direct effect of the latter, in partial agreement with the two major positions. The model is tested cross-sectionally on the data from the latest wave of World Values Survey. The results from hierarchical mixed-effect models confirm the main argument. But further examination reveals that there is still unaccounted variation especially in middle-income economies.</dcterms:abstract>
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