Relative income, happiness, and utility: An explanation for the Easterlin paradox and other puzzles
Andrew E. Clark
- Fonction : Auteur
- PersonId : 742286
- IdHAL : andrew-clark
- ORCID : 0000-0001-7004-7654
- IdRef : 035800070
Résumé
The well-known Easterlin paradox points out that average happiness has remained constant over time despite sharp rises in GNP per head. At the same time, a micro literature has typically found positive correlations between individual income and individual measures of subjective well-being. This paper suggests that these two findings are consistent with the presence of relative income terms in the utility function. Income may be evaluated relative to others (social comparison) or to oneself in the past (habituation). We review the evidence on relative income from the subjective well-being literature. We also discuss the relation (or not) between happiness and utility, and discuss some nonhappiness research (behavioral, experimental, neurological) related to income comparisons. We last consider how relative income in the utility function can affect economic models of behavior in the domains of consumption, investment, economic growth, savings, taxation, labor supply, wages, and migration.
Domaines
Economies et financesFormat du dépôt | Notice |
---|---|
Type de dépôt | Article dans une revue |
Titre |
en
Relative income, happiness, and utility: An explanation for the Easterlin paradox and other puzzles
|
Résumé |
en
The well-known Easterlin paradox points out that average happiness has remained constant over time despite sharp rises in GNP per head. At the same time, a micro literature has typically found positive correlations between individual income and individual measures of subjective well-being. This paper suggests that these two findings are consistent with the presence of relative income terms in the utility function. Income may be evaluated relative to others (social comparison) or to oneself in the past (habituation). We review the evidence on relative income from the subjective well-being literature. We also discuss the relation (or not) between happiness and utility, and discuss some nonhappiness research (behavioral, experimental, neurological) related to income comparisons. We last consider how relative income in the utility function can affect economic models of behavior in the domains of consumption, investment, economic growth, savings, taxation, labor supply, wages, and migration.
|
Auteur(s) |
Andrew E. Clark
1, 2, 3
, Paul Frijters
4
, Michael A. Shields
3, 5
1
PJSE -
Paris-Jourdan Sciences Economiques
( 1312 )
- 48 boulevard Jourdan 75014 Paris
- France
2
PSE -
Paris School of Economics
( 301309 )
- 48 boulevard Jourdan 75014 Paris
- France
3
IZA -
Institute for the Study of Labor
( 142142 )
- Allemagne
4
QUT -
Queensland University of Technology [Brisbane]
( 93528 )
- Brisbanne 4001 Queensland Australia
- Australie
5
Monash University [Malaysia]
( 31666 )
- No. 2 Jalan Universiti, Bandar Sunway, Petaling Jaya - 46150 Selangor Darul Ehsan
- Malaisie
|
Comité de lecture |
Oui
|
Vulgarisation |
Non
|
Langue du document |
Anglais
|
Nom de la revue |
|
Audience |
Non spécifiée
|
Date de publication |
2008-03
|
Volume |
46
|
Numéro |
1
|
Page/Identifiant |
94-144
|
Domaine(s) |
|
Mots-clés (JEL) |
|
DOI | 10.1257/jel.46.1.95 |
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