Subjective Well-Being, Income, Economic Development and Growth

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1 Subjective Well-Being, Income, Economic Development and Growth Dan Sacks, Betsey Stevenson and Justin Wolfers Wharton School, University of Pennsylvania and NBER Annual Bank Conference on Development Economics--Stockholm, June

2 Implications of the Easterlin Paradox Why do national comparisons among countries and over time show an association between income and happiness which is so much weaker than, if not inconsistent with, that shown by within-country comparisons? Easterlin (1974) Reference-dependent preferences Relative income matters [Other people s consumption matters] Habit formation = hedonic treadmill [Other period s consumption] Policy implications: Growth: My results, along with mounting evidence from other time series studies of subjective well-being, do on balance undermine the view that a focus on economic growth is in the best interests of society. Easterlin (2005) Public finance: If preferences are interdependent Pigouvian rationale for taxing labor supply / conspicuous consumption Sacks, Stevenson & Wolfers, Income and Happiness 2

3 Subjective Well-being 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. (Diener, 2005) Typical questions: Happiness Taking all things together, would you say you are: very happy; quite happy; not very happy; not at all happy. Life satisfaction All things considered, how satisfied are you with your life as a whole these days? [1=Dissatisfied 10=Satisfied] Satisfaction ladder: Here is a ladder representing the ladder of life. Let's suppose the top of the ladder represents the best possible life for you, and the bottom, the worse possible life for you. On which step of the ladder do you feel you personally stand at the present time? [0-10 steps]. Sacks, Stevenson & Wolfers, Income and Happiness 3

4 Research Question: What is the Relationship Between Subjective Well-being and Income? Types of comparisons Within country: Rich v. poor people in a country Between country: Rich v. poor countries National time series: Country when rich v. poor International panel: Countries with fast v. slow growth Implications Policy conclusions 1970s view Easterlin Paradox Big effects Statistically insignificant effects interpreted to be zero No effects (Japan, USA, Europe) 1990s view Satiation Big effects for income <$15k - But not for the rich GDP<$15k: Strong effects GDP>$15k: No effects No effects Richard Easterlin (2005) (Available data are for rich countries) New view: Stevenson-Wolfers findings Strong effects β time series =0.35 Largely unexamined Largely unexamined Strong effects β panel =0.35 Relative income determines wellbeing De-emphasize growth My results, along with mounting Strong effects: evidence from other time series β within 0.35 studies of subjective well-being, do on balance undermine the view Strong that effects a β between =0.35 focus on economic growth is in the best interests of society. Relative income determines wellbeing once basic needs are met Rich countries should de-emphasize growth and tax labor supply There s no paradox (and never was) Sacks, Stevenson & Wolfers, Income and Happiness 4

5 Research Question: What is the Relationship Between Subjective Well-being and Income? Types of comparisons Within country: Rich v. poor people in a country Between country: Rich v. poor countries National time series: Country when rich v. poor International panel: Countries with fast v. slow growth Implications Policy conclusions 1970s view Easterlin Paradox Big effects Statistically insignificant effects interpreted to be zero No effects (Japan, USA, Europe) 1990s view Satiation Big effects for income <$15k - But not for the rich GDP<$15k: Strong effects GDP>$15k: No effects No effects (Available data are for rich countries) New view: Stevenson-Wolfers findings Strong effects: β within 0.35 Strong effects Richard β time Layard series =0.35 (2003) Largely unexamined Largely unexamined Strong effects β panel =0.35 Relative income determines wellbeing De-emphasize growth Relative income determines wellbeing once basic needs are met Rich countries should de-emphasize growth and tax labor supply once a country has over $15,000 per head, its level of happiness Strong effects appears β between to be =0.35 independent of its income There s no paradox (and never was) Sacks, Stevenson & Wolfers, Income and Happiness 5

6 Research Question: What is the Relationship Between Subjective Well-being and Income? Types of comparisons Within country: Rich v. poor people in a country Between country: Rich v. poor countries National time series: Country when rich v. poor International panel: Countries with fast v. slow growth Implications Policy conclusions 1970s view Easterlin Paradox Big effects Statistically insignificant effects interpreted to be zero No effects (Japan, USA, Europe) 1990s view Satiation Big effects for income <$15k - But not for the rich GDP<$15k: Strong effects GDP>$15k: No effects No effects (Available data are for rich countries) New view: Stevenson-Wolfers Strong effects: β within 0.35 Strong effects β between 0.35 Strong effects β time series 0.35 Largely unexamined Largely unexamined Strong effects β panel 0.35 Relative income determines wellbeing De-emphasize growth Relative income determines wellbeing once basic needs are met Rich countries should de-emphasize growth and tax labor supply There s no paradox (and never was) Sacks, Stevenson & Wolfers, Income and Happiness 6

7 Why revisit the stylized facts? 1. Theoretical implications: Reference-dependent preferences 2. Yielding important policy implications (and big policy claims) What explains our new findings? 1. New data: Longer time series ( ); More countries (n=140) 2. Statistical inference: Absence of evidence v. evidence of absence 3. What are big versus small effects? Focus on the magnitudes What we won t do Assess causality: Happiness = β log(income) Revisit what subjective well-being data mean Sacks, Stevenson & Wolfers, Income and Happiness 7

8 Outline: Assessing the Happiness-Income link Within-country cross-sectional comparisons USA All countries Between countries: In past and current data Multiple datasets For both happiness and life satisfaction No evidence of satiation National Time Series and International Panels Japan Europe World Values Survey USA Newly-available measures of subjective well-being Sacks, Stevenson & Wolfers, Income and Happiness 8

9 Within-Country Comparisons: USA Taken all together, how would you say things are these days? Family income Very happy Pretty happy Not too happy <$12,500 (bottom 10%) 21% 53% 26% $12,500-$49,999 25% 61% 13% $50,000-$149,999 40% 54% 6% $150,000 (top 10%) 53% 45% 2% Source: U.S. General Social Survey, 2006 When we plot average happiness versus income for clusters of people in a given country at a given time, we see that rich people are in fact much happier than poor people. It s actually an astonishingly large difference. There s no one single change you can imagine that would make your life improve on the happiness scale as much as to move from the bottom 5 percent on the income scale to the top 5 percent. - Robert Frank (2005) Sacks, Stevenson & Wolfers, Income and Happiness 9

10 Well-Being and Log(Income) Satisfaction ladder score (0-10) Satisfaction and Log(Family Income) Lowess fits for the 25 Largest Countries; Gallup World Poll β within 0.35 MEX ITAFRADEU JPN COL KOR BRA IND THA VNM TUR PAK RUSIRN EGY UKR CHN PHL BGD NGA ETH USA GBR Normalized satisfaction ladder score 3 Figure shows the central 90% of the income distribution for each country Annual household income ($000s; Log income scale) Source: Daniel Sacks, Betsey Stevenson and Justin Wolfers (2010), Subjective Well-Being, Income, -1 Sa 10 cks

11 Within-country : Rich are happier than poor Gallup World Poll: Ladder question World Values Survey: Life satisfaction Pew Global Attitudes Survey: Ladder question Without controls *** (0.014) *** (0.017) *** (0.027) With controls *** (0.014) *** (0.037) *** (0.027) Permanent IV Income Adjusted *** (0.027) *** (0.035) *** (0.033) Sample size 171,900 (126 Countries) 116,527 (61 Countries) 32,463 (43 Countries) Notes: The table reports the coefficient on the log of household income, obtained from regressing standardized life satisfaction against the log of household income and country fixed effects using the indicated data set. Additional controls include a quartic in age, interacted with sex, plus indicators for age and sex missing. Our permanent income adjustment is to scale up our estimates by 1/0.55; see text for explanation. We instrument for income using full set of country education fixed effects. We report robust standard errors, clustered at the country level, in parentheses. For further details on the standardization of satisfaction and the exact wording of satisfaction question, see the text. ***, ** and * denote statistically significant at 1%, 5% and 10%, respectively. Sacks, Stevenson & Wolfers, Income and Happiness 11

12 Outline: Assessing the Happiness-Income link Within-country comparisons USA All countries β within 0.35 Between countries: In past and current data Multiple datasets Both happiness and life satisfaction No evidence of satiation the happiness differences between rich and poor countries that one might expect on the basis of the within country differences by economic status are not borne out by the international data. Easterlin, (1974) National Time Series and International Panels Japan Europe World Values Survey USA Sacks, Stevenson & Wolfers, Income and Happiness 12

13 Sacks, Stevenson & Wolfers, Income and Happiness

14 Satisfaction ladder score (0-10) wave KOR DNK MLT AUS SWE ISL IRL CAN NOR GBR NLD USA DEU BEL HUN ESPFRA JPN ITA ARG y = *ln(x) [se=0.22] Correlation= wave COL PRI CHE NZL FIN SWE MEX AUS GBR USA SLV NOR BRA URY CHNPHL DEU NGA VEN ESPJPN IND PER POLSVN CZE TWN TURHRVSVK MKD HUN SCG AZE BIH ZAF EST LTU BGD GEO ALB DOM ROM LVA BGR CHLARG ARM BLR RUS UKR MDA y = *ln(x) [se=0.05] Correlation= World Values Survey β between MLT DNK CHE IRL SWE CAN FIN AUT BEL NLD ISL NOR USA BRA GBR ESP CZE DEU ITA PRT KOR FRA POLSVK TUR JPN SVN ROMEST HUN LTU LVA BLR RUS BGR CHLMEX ZAF ARG Sacks, Stevenson Real GDP per & Capita Wolfers, (thousands Income of dollars, and log Happiness scale) 14 NGA wave CHN IND y = *ln(x) [se=0.08] Correlation= TZA wave PRI MEX MLT IRL DNK AUT ISL FIN CAN NLD LUX VEN SWE BEL USA ARG DEU GBR IDN CHL SAU SVN CZE NGA PRT ESP ISR SGP ITA FRA CHN GRC KGZ VNM PHL PER IRN HRV POL JPN MAR KOR BGD BIH ESTSVK UGA SCG JORDZA TURZAFHUN BGR INDIRQALBMKD ROM LVA LTU PAK EGYBLR MDA RUS UKR ZWE y = *ln(x) [se=0.04] Correlation= Standardized satisfaction ladder score

15 Satisfaction ladder score (0-10) TZA Pew Global Attitudes Survey, 2002 β between 0.35 NGA MLI KEN UGA UZB IDN CIV BOL SEN PAK BGDGHA AGO VNM IND HND GTM EGY VEN PER PHL JOR CHN LBN BRA UKR TURRUS BGR MEX ARG POL SVK ZAF KOR CZE CAN USA ITA FRA DEU GBR JPN Standardized satisfaction ladder score 3 y = *ln(x) [se=0.04] Correlation= Real GDP per capita (thousands of dollars, log scale) Sacks, Stevenson & Wolfers, Income and Happiness 15

16 Satisfaction ladder score (0-10) DNK FIN NZL CAN SWE NLDNOR CHE CRI AUSIRL USA ESPBEL AUT SAU ISR VEN FRA GBR MEX ITA ARE PAN PRI BRA CZE DEU SGP GRC JAM ARG CYP GTM COL MYS TWN KWT JPN JOR THA CHL HRV LTU BLR URY POL TTO SVN BOL KAZ KOR CUB HKG MMR VNM SLV ESTPRT UZB LAO PAK HND MNE INDEGY DOM IRNROMRUS SVK UNK ECU DZA BWA HUN MDA GHA IDNMAR PRY LBN PER UKR TUR ZAF NGA BIH MOZ KGZ BGD ARM ALBAZE CHN LVA NPL MRT IRQ NIC PHL SEN SRB MDG YEM ZMB TJK AGO LKA MKD MWI MLI RWA UGA CMR AFG NER BEN ETH KEN TZA BDI BFA TCD KHM HTI GEO BGR SLE ZWE TGO Gallup World Poll β between 0.35 y= *ln(x) [se=0.019] Correlation= Sacks, Real Stevenson GDP per capita, & Wolfers, (thousands Income of dollars, and log Happiness scale) Standardized satisfaction ladder score

17 Between Countries: Rich Countries Are Happier Estimates of β between Microdata National Data β between 0.35 Gallup World Poll: Ladder question World Values Survey: Life satisfaction Without controls *** (0.019) *** (0.034) With controls *** (0.019) *** (0.034) *** (0.019) *** (0.036) Sample size 291,383 (131 countries) 234,093 (79 countries) Pew Global Attitudes Survey: Ladder question *** (0.039) *** (0.038) *** (0.037) 37,974 (44 countries) Notes: This table reports the coefficient on the log of per capita GDP, obtained from regressing standardized life satisfaction against the log of GDP, using individual data with and without controls, and using national-level data without controls, in the indicated data set. In the national-level regressions, we take the within-country average of standardized life satisfaction as the dependent variable. GDP per capita is at purchasing power parity. The additional controls include a quartic in age, interacted with sex, plus indicators for age and sex missing. We report robust standard errors, clustered at the country level, in parentheses. For further details on the standardization of satisfaction, the exact wording of satisfaction question, and the sources for GDP per capita, see the text. ***, ** and * denote statistically significant at 1%, 5% and 10%, respectively. Sacks, Stevenson & Wolfers, Income and Happiness 17

18 Comparing Within and Between Country Estimates Standardized satisfaction ladder score Country-year aggregates Within-country wellbeing gradient Between-country wellbeing gradient DNK FIN NZLCAN SWE NLDNOR CHE CRI AUS IRL USA ESPBEL AUT SAU ISR VEN GBR FRA MEX ITA ARE PAN PRI BRA CZE DEU SGP GRC JAM ARG CYP GTM COL MYS TWN KWT JPN JOR THA CHL HRV LTU URY BLR POL TTO SVN BOL KAZ KOR CUB HKG MMR VNM SLV ESTPRT UZB LAO PAK HND MNE INDEGY DOM IRN ROMRUS SVK UNK ECU DZA BWA HUN MDA GHA IDNMAR PRY LBN PER UKR TURZAF NGA BIH MOZ KGZ BGD MRT NIC PHL ARM ALBAZE CHN LVA NPL SEN SRB MDG YEM ZMB TJK AGO LKA MKD MWI MLI RWA UGA CMR AFGNER BEN ETH KEN TZA BDI BFA TCD KHM HTI GEO BGR β between β within 0.35 SLE ZWE TGO Real GDP per capita (thousands of dollars, log scale) Sacks, Stevenson & Wolfers, Income and Happiness Satisfaction ladder score (0-10)

19 Are There Satiation Effects? There exists no dataset in which the well-being-income gradient changes at incomes above $15,000 There exists no income level above which further income Standardized Happiness Index Happiness and Family Income in the U.S. does not raise happiness Bottom half: Slope=0.24 (0.10) Top half: Slope=0.30 (0.07) -1.5 Inc<15k: Slope=0.31 (0.49) Inc>$15k: Slope=0.26 (0.05) Family Income ($000s) Source: Gallup Poll, December 2007 Source: Betsey Stevenson and Justin Wolfers (2010), Subjective Well-being and Income: Is There Any Evidence of Satiation? Stevenson and Wolfers, Subjective Well-Being 19

20 Outline: Assessing the Happiness-Income link Within-country comparisons USA All countries β within 0.35 Between countries: Through time Multiple datasets Both happiness and life satisfaction No evidence of satiation β between 0.35 National Time Series and International Panels Japan Europe World Values Survey USA income growth in a society does not increase happiness. - Easterlin (1995) Sacks, Stevenson & Wolfers, Income and Happiness 20

21 Happiness & Economic Growth: Time Series Evidence Japan US Old view: Life satisfaction flat, despite robust post-war growth New view: Robust growth in life satisfaction apparent only when taking account of breaks in the data Old view: No increase in happiness since 1972 despite GDP growth New view: True. but few sample participants experienced income growth Europe Old view: No clear evidence of growing life satisfaction ( ) New view: Extending data through 2007 yields clearly rising satisfaction Around the World Old view: No clear evidence of growing life satisfaction New view: Clear positive relationship between income and growth when comparing comparable samples Stevenson and Wolfers, Subjective Well-Being 21 Source: Betsey Stevenson and Justin Wolfers (2010), Time Series Evidence on the Well-Being Link

22 Time Series: No rise in happiness, despite growth Japan U.S.A Europe Life in Nation Surveys General Social Survey Eurobarometer Sacks, Stevenson & Wolfers, Income and Happiness 22

23 Japan: Well-Being versus GDP Well-being: Ordered Probit Index Evolution of Subjective Well-Being and GDP in Japan How do you feel about your circumstances at home: 1963(1) -Satisfied -Not 1959(1) satisfied, not dissatisfied -Somewhat dissatisfied -Extremely dissatisfied 1962(1) 1958(2) 1960(1) 1961(1) Pattern of responses from four different questions How do you feel about your life at home: -Completely satisfied -Satisfied -Somewhat dissatisfied -Completely dissatisfied 1964(1) 1965(1) 1966(1) 1967(2) 1968(1) 1970(1) 1969(1) 1971(1) How do you feel about Overall, to what your life now: degree are you -Completely satisfied satisfied with -Satisfied 1995(5) your life now: -Somewhat dissatisfied -Satisfied -Completely dissatisfied -Somewhat 1985(5) 1993(5) 1996(7) satisfied 1992(5) -Somewhat dissatisfied 1979(5) -Dissatisfied 1986(5) 1977(5) 1990(5) 1991(5) 1997(5) 2006(10) 1982(5) 1994(5) 1984(5) 1973(1) 1978(5) 1983(5) 1987(5) 1988(5) 1981(5) 1999(12) 1980(5) 1989(5) 1976(5) 2007(7) 1975(5) 2001(9) 1972(1) 1976(11) 2002(6) 2004(6) 2005(6) 1974(1) 1975(11) 2003(6) -0.3 Slope=0.19 [se=0.13] Slope=0.16 [se=0.08] Slope=0.18 [se=0.07] 1974(11) Slope=-1.14 [se=0.51] Real Japanese GDP per Capita, PPP (log scale); 2000 US$ β time series 0.35 Source: Life-in-nation surveys, Stevenson and Wolfers, Subjective Well-Being 23

24 Japan: Raw data Real Japanese GDP per capita PPP (Log scale) Subjective Well-Being: Ordered Probit Index $32k $16k $8k $4k $2k $1k $.5k % 12.8% Japan: Economic Conditions Stevenson 1970 and Wolfers, 1980 Subjective 1990Well-Being % Real GDP per capita GDP trend Unemployment rate (right axis) Subjective Well-Being Raw series, with breaks.9% Unemployment Rate (%)

25 USA: Is it surprising that happiness hasn t grown? Happiness: Ordered Probit Index Change since 1972 in log(average income) Change since 1972 in average log(income) Income and Happiness Trends in the U.S. Average Happiness Measures of Log(Average Income) GDP per capita Average household Average income [CPS] household income [GSS] Measures of Average Log(Income) Happiness t = * Average log household income in GSS t [95% ci: ] Happiness t = * Average log household income in CPS t [95% ci: ] Average log(household income) [GSS] Average log(household income) [CPS] 1970 Sacks, 1975 Stevenson 1980 & 1985 Wolfers, Income 1990 and 1995 Happiness

26 Change in Life Satisfaction and Economic Growth in Europe Belgium Denmark Greece y = * log(gdp) [se=0.14] Correlation = y = * log(gdp) [se=0.05] Correlation = 0.73 y = * log(gdp) [se=0.10] Correlation = 0.22 Life Satisfaction, 0-10 Scale France Netherlands y = * log(gdp) [se=0.10] Correlation = 0.63 Ireland United Kingdom y = * log(gdp) [se=0.05] Correlation = 0.30 Italy West Germany y = * log(gdp) [se=0.09] Correlation = β time series 0.35 y = * log(gdp) [se=0.07] Correlation = y = * log(gdp) [se=0.03] Correlation = Stevenson and Wolfers, Subjective Well-Being Real GDP per capita (thousands of dollars, log scale) y = * log(gdp) [se=0.08] Correlation =

27 Change in Life Satisfaction & Economic Growth: World Values Survey Cumulative change in life satisfaction (z-scale) Changes between waves I and II Ch. Sat.= *Ch. GDP [se=0.15] ITA ESP BEL MLT ARG CAN NLD FRA USA IRL ISL DNK SWEJPN NOR DEU GBR HUN KOR Changes between waves I and III Ch. Sat.= *Ch. GDP [se=0.27] JPN ARG USA ESP GBR SWE AUS DEU NOR HUN β time series 0.35 Changes between waves II and III Ch. Sat.= *Ch. GDP [se=0.11] JPN SVN FIN ARG GBR USA DEUNOR CHE SWETUR CZE BRA HUN POL BGR ESP SVK RUS LVA LTU EST BLR ROM Stevenson & Wolfers, Economic Growth and Happiness 27 Cumulative change in real GDP per capita (percent) CHL Changes between waves II and IV Ch. Sat.= *Ch. GDP [se=0.12] SVN BGR CZE DEU AUT FRA FIN DNK NLD ISL ESTJPN ITA BEL USA GBR CAN PRT ESPMLT POL SWE HUN LVA RUS BLRROM SVK TUR LTU IRL KOR Changes between waves III and IV Ch. Sat.= *Ch. GDP [se=0.25] EST VEN MDA CZE BGRSVN UKR MEX DEU ESP ALB BLR ROM BIH LVA PRI RUS HRV ZAF PER LTUFIN SCG SVK POL USA GBR JPN HUN PHL SWE TUR MKD Changes between waves I and IV Ch. Sat.= *Ch. GDP [se=0.08] HUN ITA ESP FRA BEL DEU NLD CAN DNK ISL USA JPN GBR SWE MLT KOR Offscale (215, 0.35) IRL

28 Normalized satisfaction, relative to country and wave fixed effects International Panel Data: World Values Survey β panel Sacks, Stevenson Log GDP, & Wolfers, relative to country Income and and wave Happiness fixed effects y = 0.51*ln(x) [se=0.12] Correlation=

29 Satisfaction and Growth: International Panel Regressions Panel A: Panel Regressions ln(gdp) *** N (0.109) 166 observations 79 countries ** (0.239) 31 observations 10 countries *** (0.116) 135 observations 66 countries ** (0.074) 776 observations 31 countries Panel B: Long differences ln(gdp) *** * ** * (0.128) (0.387) (0.163) (0.164) N 66 differences 10 differences 46 differences 30 differences β panel 0.35 Sacks, Stevenson & Wolfers, Income and Happiness 29

30 Normalized satisfaction, relative to country and wave fixed effects International Panel Data: Eurobarometer β panel 0.35 y = 0.17*ln(x) [se=0.05] Correlation= Sacks, Stevenson & Wolfers, Income and Happiness log GDP, relative to country and wave mean 30

31 Change in satisfaction, relative to country and wave fixed effects RUS Long Differences: World Values Survey LTU LVA BGR HUN BLR β panel 0.35 ISL SCG VEN UKR EST ITA CZE FRA BELDEU NLD CHE BIH HRV DNK ZAF CAN AUS PER SWE PHL SVK ROM MKD TUR USA JPN MDA ESP MEX AUT FIN GBR BRA PRT NOR SVN ALB PRI POL MLT IRL KOR KOR Offscale (1, 0.33) y = *ln(x) [se=0.13] Correlation= Sacks, Stevenson & Wolfers, Income and Happiness Change in log GDP, relative to country and wave fixed effects 31

32 Change in satisfaction, relative to country and wave fixed effects GRC FRA GRC DNK NLD FRG FRG LUX DNK GBR ITA FRG Long Differences: Eurobarometer DNK FRA BEL GBR NLD BEL AUT PRT NLD ITA ESP SWE GBR IRL GRC LUX FRA BEL NOR ESP FIN β panel 0.35 ITA PRT IRL GDR LUX GDR IRL y = *ln(x) [se=0.16] Correlation= Sacks, Stevenson & Wolfers, Income and Happiness Change in log GDP, relative to country and wave fixed effects 32

33 Conclusion: Stylized Facts about Well-being and Income Within-country comparisons USA All countries β within 0.35 Between countries: Since 1946 Multiple datasets Both happiness and life satisfaction No evidence of satiation β between 0.35 National Time Series Japan USA 9 European nations β time series 0.35 International Panel data World Values Survey Eurobarometer β international panel 0.35 Other measures of well-being Pain, depression, smiling, good tasting food to eat, respect Sacks, Stevenson & Wolfers, Income and Happiness 33

34 Is there any evidence of satiation? if we compare countries, there is no evidence that richer countries are happier than poorer ones so long as we confine ourselves to countries with incomes over $15,000 per head. - Layard (2005) Rich countries (GDP>$15,000) Satisfaction=1.08*log(GDP) [se=0.21] Poor countries (GDP<$15,000) Satisfaction=0.35*log(GDP) [se=0.04] A 1% rise in GDP: Has three times larger effects in rich countries than poor countries A $100 rise in GDP 3x larger effect in Jamaica than US 20x larger effect in Burundi than US Stevenson and Wolfers, Subjective Well-Being 34

35 Is there any evidence of satiation? if we compare countries, there is no evidence that richer countries are happier than poorer ones so long as we confine ourselves to countries with incomes over $15,000 per head. - Layard (2005) Rich countries (GDP>$15,000) Satisfaction=1.08*log(GDP) [se=0.21] Poor countries (GDP<$15,000) Satisfaction=0.35*log(GDP) [se=0.04] A 1% rise in GDP: Has three times larger effects in rich countries than poor countries A $100 rise in GDP 3x larger effect in Jamaica than US 20x larger effect in Burundi than US Life satisfaction (ordered probit index) Linear income scale DNK FIN CAN NLD AUS CHE NOR NZL SWE VEN BEL CRI ISR ESP FRA AUT IRL 1.0 SAU USA 1.0 GBR ITA BRA ARE MEX PRI DEU CZE JPN SGP ARG CYP 0.5 JAM JOR PAN TWN COL CHL KWT 0.5 MYS GRC GTMTHA LTU DZAURY HRVTTO SVN SLVBLR KOR POL LBN HKG BOL HND CUB KAZ IND ESTPRT MMR UZB VNM EGYIRN MNE SVK 0.0 MRT DOM HUN UNK PAK 0.0 MDA LAO ECU ROM ZAF IDN BIH RUS ZMB PER NGAPRY AZE BWA KGZPHL SRB UKR ALBTUR LVA MOZ NPL TJK SEN GHA MAR MKD CHN YEMNIC BGDLKA -0.5 RWA AFG AGO ARM BDI -0.5 MDG KEN MLI MWI BFA CMR BGR NER ETH UGA ZWE HTI IRQ GEO TZA SLE KHM TCD -1.0 BEN TGO -1.0 FIN CAN AUS NLDNOR CHE NZL SWE VEN BEL CRI ISR ESP FRA AUT IRL SAU USA GBR ITA BRA ARE MEX PRI DEU CZE SGP JPN ARG JAM JOR CYP PAN TWN COLMYS CHL KWT GRC GTM THA LTU DZA URY HRV TTOSVN SLV BLR KOR POL LBN HKG BOL HND CUB KAZ IND EST PRT MMR UZBVNMEGY IRN MNE SVK MRT DOM HUN UNK PAK LAO MDA ECU ROM ZAF IDNBIH RUS ZMB PER NGA PRYAZE BWA KGZ PHL SRB UKR ALB TUR LVA MOZ TJK NPL SENGHA MAR MKD CHN YEM NIC BGD LKA ARM BDI RWA AGO AFG MDG MLI KEN MWI BFA CMR BGR NER ETHUGA HTI ZWE IRQGEO TZA SLE KHM TCD BEN TGO Real GDP per capita (thousands of dollars) 1.5 Log income scale DNK Sacks, Stevenson & Wolfers, Income and Happiness 35

36 4 Happiness and GDP (World Values Survey) Happiness (1-4 Scale) 3 2 TZA NGA MEX PRI VNM VEN ISL IRL CAN DNK NLD SAU BELUSA PHL SWE SGPAUT FRA IDN CHL ARG MLT JPN ZAF FIN UGA KGZ ESP BIHMAR PRTISR DEU PAKIND PERDZA CZE KOR ITA BGD JOR GRC CHN MKD TUR HRV POL SVN SCG IRN LTU HUN BLR EST SVK ZWEIRQ ALB LVA MDA UKR BGR ROM RUS EGY y = *ln(x) [se=0.05] Correlation=0.29 Excluding NGA and TZA: y = *ln(x) [se=0.04] Correlation= Sacks, 1 Stevenson 2 & Wolfers, 4 Income 8 and Happiness GDP (log scale) LUX Standardized happiness 36

37 Happiness versus Life Satisfaction 1.5 Happiness Kettering-Gallup Survey, Life satisfaction IND BRA MEX GBR AUS CAN USA FRA DEU JPN ITA y = *ln(x) [se=0.14] Correlation= IND BRA MEX AUS GBR CAN DEU USA ITA JPN FRA y = *ln(x) [se=0.14] Correlation=0.78 Ordered probit index DNK MLT CYP ESPSWE FIN AUT IRL GRC DEU GBR ITA BEL NLD ROM HUN CZE SVN FRA POL EST PRT TUR LVA LTU SVK BGR LUX y = *ln(x) [se=0.07] Correlation= SLV ROM BGR First European Quality of Life Survey, 2003 DNK IRL GBR BEL SWE NLD FRA FIN POL ESP PRT CZE FRG AUT GDR GRCITA LVA LTU SVK EST HUN LUX y = *ln(x) [se=0.12] Correlation= Eurobarometer, DNK FIN SWE AUT IRL MLT CYP ESP DEU GBR BEL NLD SVN ITA GRC FRA CZE ROM POL TUR ESTHUNPRT LVASVK LTU BGR LUX y = *ln(x) [se=0.10] Correlation= SLV DNK SWE NLD LUX FIN GBR BELIRL ESP CZE FRA FRG TUR AUT HRV POL SVK EST GDR GRCITA LVA LTU PRT ROM HUN BGR y = *ln(x) [se=0.15] Correlation= Sacks, Stevenson Real GDP & per Wolfers, capita (thousands Income of dollars, log and scale) Happiness 37

38 More Income is Associated with Less Pain More Enjoyment Less Depression BUT More Stress How do people s days differ with income? More likely to be treated with respect More likely to eat good tasting food More likely to smile or laugh And people are more likely to want to have more days like the one that they just had Stevenson and Wolfers, Subjective Well-Being 38

39 Enjoyment Correlation: 0.49 Physical Pain Correlation: Worry Correlation: 0.11 Sadness Correlation: Percent experiencing the indicated feeling yesterday y= *ln(x) [se=0.67] Boredom Correlation: y= *ln(x) [se=0.48] Depression Correlation: y= *ln(x) [se=0.76] Anger Correlation: y= *ln(x) [se=0.47] Love Correlation: y= *ln(x) [se=0.67] 0 y= *ln(x) [se=0.44] y= *ln(x) [se=0.55] Sacks, Stevenson Real GDP per & capita Wolfers, (thousands Income of dollars, and log Happiness scale) 39 0 y= *ln(x) [se=0.93]

40 Would you like to have more days just like yesterday? Yesterday Did you feel well rested yesterday? Were you treated with respect all day yesterday? Were you able to choose how you spent your time all day? Percent reporting indicated feeling Correlation = 0.14 y= *ln(x) [se=0.61] Did you smile or laugh a lot yesterday? Correlation = 0.15 y= *ln(x) [se=0.61] Were you proud of something you did yesterday? Correlation = 0.43 y= *ln(x) [se=0.65] Did you learn or do something interesting yesterday? Correlation = 0.19 y= *ln(x) [se=0.67] Did you have good tasting food to eat yesterday? Correlation = 0.28 y= *ln(x) [se=0.79] Correlation = 0.00 y= *ln(x) [se=1.00] Correlation = 0.01 y= *ln(x) [se=0.94] Sacks, Stevenson Real GDP per & capita Wolfers, (thousands Income of dollars, and log Happiness scale) 40 0 Correlation = 0.59 y= *ln(x) [se=0.68]

41 Proportion who experienced this feeling during a lot of the day yesterday NZL DNK CAN KWT LAO CRI SWE IRL CHE USA NOR PRYSLV AUS AUT NLD CHN CYPGBR GTM ECU ARG MEX UZB BRA BEL NPL DJI IDN THA VEN TWN COL TTO MLI JAMPAN SAU GUY URY MYS CHL CZE KEN FRA DEU MRT PHL HND ARE BLZ LVA NER SEN BOL HUN NGA NIC ZAF SVK TZA NAM POLEST SGP BGD FIN KHM GIN IND LKA ISR JPN SDN JOR PER HKG ROU AFG MWI ZMB DOMKAZ BWA SVN GRC CAF RWA TJK EGYBIH MKD SRB ESP ITA COD MDG KGZ MDA UKR RUS ZWE MMR HRV UGA BFATCD PAK GHA COG TUN BLR PRT KOR SYR CMR IRN BGR LTU ALB LBN ETH MNG AGO AZE HTI BEN YEM MAR MOZ TUR DZA TGO ARM VNM LBR BDI GEO SLE Correlation = 0.49 Enjoyment Real GDP per Capita at PPP ($000s, log scale) Stevenson and Wolfers, Subjective Well-Being 41

42 0.40 Depression Proportion who experienced this feeling during a lot of the day yesterday ETH KHM YEM SLE HTI BGD BOL IRN LBR LBN KOR RWA PHL PAK AZE AFG IND ARM EGY NIC DZA PER HUN ZWE CMRMDA SYR UGA JOR ECU BLZ DOM ARE BIH COL BLR PRT SRBTUR TZA TJK GUY GEO ZAF HRV JPN SDN GTM CHL BWA TTO MDG GIN MAR COG MKD MWI MOZ TGO UKR TUN BDI NGA AGO CRI BGR CZEISR GHA VNMNGLKASLVJAM KAZ EST HKG COD BEN HNDNAM ROU URY MEX RUS TWN MYSLTU SVK SGP CHN ARG SAUITAKWT NPL TCD VEN USA ZMB LVA GRCGBR NER CYP ESP BRA BEL AUS KEN KGZ PRY UZB FIN CAN CAFMMR PAN MLI BFA DJI THA SVN NZL NOR MRT POL FRA IDN DEU IRL LAO AUT NLD SEN SWE CHE ALB DNK Correlation = Real GDP per Capita at PPP ($000s, log scale) Stevenson and Wolfers, Subjective Well-Being 42

43 Proportion who experienced this feeling during a lot of the day yesterday ZWE LBR BDI Correlation = 0.33 Stress PHL SYR CYP GRC DZA ROU GUY LBN LKA TUR USA IRN HKG TUN KOR NZL DOM ISR ITA DEU RWA BLZ AUS CAN HTI KHM TJK SLE PRT MDG BOL CHN COL PER GBR JOR ECU CRI SVK TWN BEL EGY FRA JPN SGP UGA MEX HUN ARG ARE AUT CHE TZA NGA BGD YEM BRA URY MYS GHA IND CHL IRL MWI NIC SLVTHA ZAF VEN LVA TTO BWACZE ESP ETH FIN KWT NOR CMR GTM POL SAU VNM KEN HND JAM SEN AGO EST DNK AFG PAK PAN SVN SWE TGO MDA ARM NLD MOZ ZMB BEN TCD GEO COG AZE BLR NER LTU BFA IDN KAZ MMR MLI NPL PRY UKR RUS KGZ LAO MNG MRT UZB DJI Real GDP per Capita at PPP ($000s, log scale) Stevenson and Wolfers, Subjective Well-Being 43

44 1.00 Were you treated with respect all day yesterday? Proportion agreeing ZWE LBR COD BDI ESP PRY ARG NIC DOM COLCRI BRA VEN FRA BEL KWT NLD AUT CHE CHL DEU DNK IRL ECU PAN POL PRT SWE SLV URY FIN AUS ARE NER UZB NOR PHL HND BOL CYP CAN ARM EGY PER TTO SVN NZL VNM ITA GRCGBR LBNMEX TWN USA MOZ SEN SDN EST GIN GHA CHN HUN IDNGTM JOR LVA MLI MRT AFG BFA KGZPAK NAM TUNROU RUS MAR BGR ISR KEN HKG MDG NGA YEM UKR SAU AGO MKD KAZ BWA TZA ZMBTJK MDAGUY COG GEO AZE DZA JAMSRB IRNMYSSVK SYR HRV SLE BEN BLZBLR BGD CMR ZAF ALB CZE CAF MWI DJI TGO KHM TUR SGP BIH THA UGA IND LKA LTU HTI TCD RWA MNG JPN ETH KOR 0.50 Correlation = 0.46 MMR NPL LAO Real GDP per Capita at PPP ($000s, log scale) Stevenson and Wolfers, Subjective Well-Being 44

45 1.00 Did you have good tasting food to eat yesterday? Proportion agreeing PRT FINIRL CAN AUT NLD GUY TTOSVN NZL LAO PRY MEX HRV GBR BEL SWE AUSUSA DNK JAMSRB VEN HUN SVK EST ARE KWTNOR PAN DEU CHE MNG ITA SEN UZB EGY THA BIH CRI BGR ARG CZE ECU ESP GHA MRT MKD JOR URY BLZBRA POL SAU LTU CYP MDG NGA SDN COLROUCHL ISRFRA JPN KGZ HND BOL GTMSLV KAZ LBN GIN UKR DOM IRNMYS MOZ NAM PER TUR RUS NPL TZA LVA GRC NIC ZAF ALB AZE BLR LBR PHL AFG MMR KOR KEN TJK PAK COD SLE NER CMR VNM AGO HKG TGOMLI MDA BWA SGP BDI CAF MWI KHM MAR ZWE BFA ZMB IND UGA TCD HTI ARM TWN BGD YEM RWA BEN GEO CHN ETH IDN Correlation = 0.60 LKA Real GDP per Capita at PPP ($000s, log scale) Stevenson and Wolfers, Subjective Well-Being 45

46 Proportion agreeing ZWE COD LBR Correlation = 0.29 BDI Did you smile or laugh a lot yesterday? NAM SLV CRI LAO BRA IRL NGA NIC PAN VEN PHL PRY HND ECU ARG ESP GTM THA COL MEXTTO CAN CYP NZL IDNCHN JAM TWN BEL KWT SDN DOM AUS BOL CHL GBR GUY LKA ZAF JPNLD USA URY DNK FRA AUT CHE MRT MYS NOR PER PRT SWE TZA VNM MDG GHA BLZ RWA EGY BWA GRCFIN HKG MLI ZMB KEN KHM POL DEU NER MWI MOZ ARE DJI ITA SEN GIN PAK MARJOR CZE KOR ISR SGP SLE HTI BFA BEN KGZ UZB UGA TUN SAU MMR COG DZA TUR IND AGO CMR YEM SYR KAZ HUN IRN SVN AFG NPL ROU RUS SVK TJK UKR ETH BGD BGR CAF BIH BLR LVA EST TCD LTU MNG MDA MKD TGO ARM LBN HRV ALB SRB AZE GEO Real GDP per Capita at PPP ($000s, log scale) Stevenson and Wolfers, Subjective Well-Being 46

47 0.90 Would you like to have more days just like yesterday? Proportion agreeing ZWE BDI COD LBR Correlation = 0.21 KWT HND PRY SLV MEX SGP MRT CRI VEN DJI GTM PAN UZB ECU ARG KEN PAK NIC IDN JAM SAU AFG BOL COL ESP MLI TZA BRA ARE IRL NER MOZ NGA PHL SEN URY PRT FRA DNK BEL SWE BLZ MKD MYS CAN NLDNOR NPL PERZAF AGOBIH CHE MDG CHL CZE GHA GUYNAM USA DOM HUN EST HKG KGZ LAO VNM THASRB IND LKA LTU SDN TTO JOR NZL BGR GBR BFA ZMBTJK KAZ HRV ISRAUS UKR POL LVA FIN GIN CYPJPN MWI ROU TUR SVN AUT SLE UGA TCD KHM CHN BWA ETH HTI EGY TWN RWA GRC BGD CMRMDA LBNRUSVK MAR BLR KOR BEN ITA MMR MNG SYR CAF COG ALB DEU TGO AZE DZA ARM YEM IRN TUN GEO Real GDP per Capita at PPP ($000s, log scale) Stevenson and Wolfers, Subjective Well-Being 47

48 0.90 Were you able to choose how you spent your time all day? Proportion agreeing ZWE COD LBR BDI ESP JPN KWT VNM PHLPRY CHN SLV NGANIC BEL ARM CRI VEN TTO ITA BRA IRL AFG MDG COL FRA HND NAM PAN TWN MRT ARE AUT UZB PAK GTM ECU DOM MYS HKG NER JAM TZAKENLAO DNK GIN GHA MEX PRT KOR NLD SEN SAU AGO ARGHUN GBR FIN SLE TGO UGA ZAF CAF BOL BLZ CAN CMR SDN THA URY SWE RWA IDN POL PER CHL NZLAUS CHE USA ZMB EGY BFA BWA MWI BEN JOR ROU LBN DEU NOR MOZ BGR MAR GUY LKA SVN MLI MNG KAZ SGP YEM LVA KHM MDA SRB BIH BLR HRVEST GRC MKD RUS TCD UKR KGZ ETH LTU SVK TJK CZE CYP ISR BGD NPL IND TUR HTI IRN MMR 0.40 Correlation = 0.13 GEO ALB AZE Real GDP per Capita at PPP ($000s, log scale) Stevenson and Wolfers, Subjective Well-Being 48

49 Proportion who experienced this feeling during a lot of the day yesterday IRN ARMDZA TUR HTI YEM PHL TUN GUY SYR LBN ARE SLE PAK BOL SVK ISR TGO GEO JOR EGY CZE FRA AZE BIH SRB SAU LBR BGD BDI CAF BFA TCD COG ECU BLZ CHL COD UGA MAR MKD COL POL GIN IDN KOR TZA AFGETH BEN IND PER LTU SEN AGO SGP ARG ZWE NGA LAO CMR UZB LKA ALB JAM MYS ESP ZMBKHMSDNMDA TTO MNG GTM ROU VEN BRA BLR CYPDEU GBR BEL GHA HRV HUN SVN GRC USA MWI AUS TJK MRT URY BWA NZL ITA JPN CAN KWT MDG DJI CHN HKG MOZ DOM NERRWA UKR ZAF MLI KEN NIC KAZ CRI LVA TWN THA DNK BGR AUT CHE NAM EST IRLNOR NPL PRYSLV PAN RUS SWE KGZVNM MEX PRT HND NLD MMR FIN Correlation = 0.13 Anger Real GDP per Capita at PPP ($000s, log scale) Stevenson and Wolfers, Subjective Well-Being 49

50 Boredom Proportion who experienced this feeling during a lot of the day yesterday GEO IRN ARMAZE SYR DZA MAR YEM JOR LBN TUN AFG HTI PHL HKG KHM ALB ETH IDN BOLEGY NIC BLZ GRCARE ZWE RWA PER CHL KOR MDA LBR AGO BDI SLE TGO COL MEX UGA TJK GUY MKD SRB USA BIH GIN MYS SAUISR CMR SLV GBR ECU ROU BEN GTM HRV KEN THA BGD BLR URY TCD PAK ARG CHN BGR BWA AUS JAM CRI ESP ITACAN IRLNOR COD DOM CAF GHAKGZ LKA UKR TTO NZL SGP NPL SDN UZB POL KAZ MOZ MDGBFA IND HND ZAF RUS TZA NAM LTU TWN ZMB VEN JPN SEN ESTCYP FIN KWT MLI VNM PAN SVK PRT FRA SWE MWI BRA NER MNG LVA PRY CZE BEL CHE SVN MRT DEU DNK AUT Correlation = 0.11 NGA LAO HUN MMR NLD Stevenson and Wolfers, Subjective Well-Being TUR Real GDP per Capita at PPP ($000s, log scale) 50

51 Proportion who experienced this feeling during a lot of the day yesterday ZWE LBR BDI COD Correlation = 0.15 KHM BOL PHL ARM SLE HTI IRN PRT TGO NIC MDA ROU CHL YEM COGAGO DOM SYR EGY BLR BGD ECU LTU BEN COL BGRHRV ITA ARG CAF CMR PAK LBN RWA GUY AZE BRA SRB ISR GIN GTM HUN GBR MOZ GEO UKR BLZ POL SVK BFA SLV ALB DZA ETH BIH KAZ IND IDN CRI URY MEX RUS LVA BWA CYP ESPARE AFG UGA ZMB VNM TCD LKA SDN JAM TUN TZA EST MAR GRC FRA DEU BEL GHA HND PRY ZAF SGP TTO JOR CZE NZLAUSUSA CAN CHE MWI TJK IRL MDG AUT KEN KGZ MNG MKD KOR KWT NER SEN UZB VEN NLD MLI NGA PAN SVN NOR MYS SAU SWE DNK NPL NAM JPN HKG MRT FIN DJI LAO CHN THA TWN MMR Sadness PER Stevenson and Wolfers, Subjective Well-Being TUR Real GDP per Capita at PPP ($000s, log scale) 51

52 Proportion who experienced this feeling during a lot of the day yesterday HRV SVN PER BOL PRT DZA ARM MOZ TGO SRB YEM CHL ARG BEN KHM PRY AGO TUN URY BRA ROU GIN EGY DOM COLIRN ISR NIC ITA LBR CAF ECU BIH KOR HKG SLE BFA CMR PHL SYR LBN SVK ZWE HUN CYP BGD COG CRI NLD MDA GRCCAN JORSLV ALB AZE MKD TUR MEX LVA CZE ESP BEL GTM COD MAR NZL USA BDI TCD PAK IDN BLR BGR FRA GBR AUS CHE GUY LTU HTI SEN POL VNM BWA FIN UGA IND ARE MLI ZMB ZAF HND VEN UKR EST BLZ DEU JPN AFG MWI MNG THA SAU SGP MDG SDN GEO CHN PANMYS RUS NER GHA DNK AUT IRLNOR NPL RWA NAM TTO ETH KENGA MRT KWT TZA LAO UZB JAM LKA KAZ SWE TJK KGZ TWN Correlation = 0.09 MMR DJI Worry Real GDP per Capita at PPP ($000s, log scale) Stevenson and Wolfers, Subjective Well-Being 52

53 Proportion agreeing Were you proud of something you did yesterday? LAO CRI NER NGA NIC VEN ECU PAN GIN KHM MRT SLV SEN SDN NAM COL NZL MLI HND BOL GTM DOM THA TTO CAN BRA AUS IRL USA PRY GUY PER BLZ CHL IDN JAM MEX ARG SVN BDI MOZ BFA ZMBKEN KWT SLE CMR ROU ESP LBR TZA URY AUT COD GHA AGO KOR TGO UZB ZAF GBR FIN MWI MYS SAU SWE NLD POL HUN CHE AFG CAF UGA TCD MDA ISRDEU BIH PRT ITA BEL DNK NOR ZWE MDG SRBTUR HTI PHL EGY MKD LBN HRV BWA SVK CYP KGZVNM LVA EST ARE TJK KAZ LTU CZE FRA RWA BEN UKR BLR GRC SGP ETH PAK ARMALB RUS JPN MAR LKA JOR YEM CHNAZE IRN BGR Correlation = 0.00 MMR IND MNG NPL BGD GEO Stevenson and Wolfers, Subjective Well-Being TWN HKG Real GDP per Capita at PPP ($000s, log scale) 53

54 0.90 Did you feel well rested yesterday? Proportion agreeing KWT PRY IDN NAM VEN CHN HND SLVTHA MYS PAN COL CRI MEX JPN MRT HKG LAOVNM ESP ECU IRL NPL NGANIC PHL SGP UZB MAR ZAF TWN ARE AUT DJI ARG AFG BOL GTM URY PRT EGY MWI TZA SDN SAU NLD GHA BEL BLZ CAN CHE GIN MLI KEN SEN KOR NER MNG COG JOR DOM SVN FIN COD UGA PER BRA CHL DNK GUY BWA KHM DEU BGD CMRIND JAM MKD NOR ZMB MOZ PAK KGZ AGO BGR GBR SWE USA RWA TUNSRB IRN TTO SLE ISRFRA AUS LBR LKA BIH KAZ NZL ZWE POL CAF BEN TCD TUR CZEGRC ITA BDI BFA HTI HRV SVK EST TJK LBN SYR LVA ROU RUS TGO YEM UKR LTU MDG DZA BLR ETH MMR MDA CYP HUN Correlation = 0.14 AZE GEO ARMALB Real GDP per Capita at PPP ($000s, log scale) Stevenson and Wolfers, Subjective Well-Being 54

55 Proportion agreeing Did you learn or do something interesting yesterday? VEN NGA NIC GUY SLV GIN GTM ECU PAN CRI NER MRT DJI COL TTO NZL MLI SEN NAM HND JAM BLZ KWT SLE PHL CAN BOL PRY THA LBR KEN AGO MEX SDN DOM PER BRA AUS DNK NOR RWA TZA USA ZMB CHL ARE AFG CAF GHA CMR VNM IRL MOZ SWE FIN CHE ARG MYS JPN BWA AUT COD MWIUGA TCD ZAF PRT ESP GBR BFA LAO COG URY FRA EGY SAU SVN HTI ISRBEL ZWE BIH CZE DEU ETH IDNJOR MKD HRV ITA SGP UZB ESTCYP BEN MDA LVA NLD MAR SYR DZA SRB ROU POL TGO LBN TWN TJK KGZ LTU KAZ GRC YEM UKR RUS PAK LKA AZE TUN HUN SVK ARM BDI BLR IRN TUR KOR KHM MMR IND CHN ALB MDG HKG MNG BGR NPL Correlation = 0.01 BGD GEO Real GDP per Capita at PPP ($000s, log scale) Stevenson and Wolfers, Subjective Well-Being 55

56 1.00 Love Proportion who experienced this feeling during a lot of the day yesterday RWA PHL KHM HUN PRY CYP CRI LBN TTO NGA TZA GUY ECUBRA ESP LAO JAM VEN ARG MEX GRCBEL CAN COL DNK MDG VNM PRT DOM NZL ITANLD USA URY TUR CAF MWI GHA CHL SAU ARE DEU AUS LBR ZMBKEN NIC NAM ZAF PAN PAK HND AUT CHE BGD EGY SLV FRA GBR SWE BIH FINIRL ZWE KWT SLE IND PERSRB BOL BLZ BDI HTI CHN MKD IRN HRV TWN MOZ LKA GTM POL SVN COD UGA NOR SDN JOR GINBFA AGO ALB THA ISR BWA AFG NER MLI SEN IDN ROUMYS NPL CMR BGR SVK HKG CZE JPN SGP MMR BENMRT KOR TGO LVA EST TCD RUS LTU ETH YEM TJK MDA AZE UKR KAZ MAR GEO BLR Correlation = 0.19 KGZ UZBMNG ARM Real GDP per Capita at PPP ($000s, log scale) Stevenson and Wolfers, Subjective Well-Being 56

57 0.50 Physical Pain Proportion who experienced this feeling during a lot of the day yesterday ZWE LBR BDI COD SLE CAF Correlation = 0.39 TGO MDA EGYDZA ETH HTI CMR YEM SYR SDN NER BEN SEN COG JOR ARM AGO PER TUN CHL BFA MRTNIC DOM ARG MOZ PAK BOL AZE ROU GIN UGA TZA ALB ISR KWT TCD GEO ECU HUN RWA GHA KHM COL BRA PRT LKA CRI ESP FRA GTM SLV IRNMEX MWI NGA UKR LBN VEN URYBWA KOR CYPBEL CHE BGDTJK GUY AFG MLI KGZIND MAR HND KAZ BIH BLZ BLR HRV GRC SGP MMR NPL PHL SVK SVN USA NZL ZMB UZB PRY ITA GBR AUS ARE CAN SRB TTO MKD ZAF LTU CZE DEU DJI THA BGR TUR LVA DNK MDG KEN PAN RUS SAU SWE FIN AUT IDN NAM POL EST JPN NLD NOR MYS TWN CHN JAM HKG IRL LAO MNG VNM Real GDP per Capita at PPP ($000s, log scale) Source: Alan Krueger, Betsey Stevenson and Justin Wolfers, A World of Pain. Stevenson and Wolfers, Subjective Well-Being 57

58 A Global Map of Pain Stevenson and Wolfers, Subjective Well-Being 58

59 Blank slide: End of talk Sacks, Stevenson & Wolfers, Income and Happiness 59

60 Research Program Research program (with Betsey Stevenson) that seeks to establish robust stylized facts about subjective well-being Relationship between income and happiness Economic Growth and Happiness: Reassessing the Easterlin Paradox Consequences of income inequality The Happiness Price of Income Inequality (in progress) Happiness and gender The Paradox of Declining Female Happiness Subjective well-being and the business cycle Is Business Cycle Volatility Costly? Trends in the distribution of happiness Happiness Inequality in the United States Affect versus evaluative measures of well-being A World of Pain (also with Alan Krueger) Sacks, Stevenson & Wolfers, Income and Happiness 60

61 Subjective Well-Being and the Business Cycle

62 Subjective Well-Being and the Business Cycle 0.10 Business Cycle and Happiness, U.S. Correlation = Standardized happiness index Unemployment rate - Natural Rate Scale reversed Happiness Unemployment, relative to NAIRU (right axis; inverse scale) Stevenson and Wolfers, Subjective Well-Being 62

63 New Opportunity: Daily Data Satisfaction Ladder (%"Thriving": Satisfaction >8) Jan-08 Feb-08 Mar-08 Satisfaction: Daily Data Source: Gallup Daily Poll Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Stevenson and Wolfers, Subjective Well-Being 63 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09

64 The Paradox of Declining Female Happiness Betsey Stevenson and Justin Wolfers Wharton School, University of Pennsylvania and NBER UC Berkeley Psychology and Economics Seminar, October

65 Happiness in the United States Happiness %>median happiness / Estimated happiness index Happiness in the United States %>Median Happiness: Women Men Ordered probit index: Women Men Difference Source: General Social Survey Sacks, Stevenson & Wolfers, Income and Happiness 65

66 Inequality and Subjective Well-Being Betsey Stevenson Wharton School, University of Pennsylvania; CESifo and NBER Justin Wolfers Wharton School, University of Pennsylvania; CEPR, CESifo, IZA and NBER

67 Research Question Does inequality undermine average levels of subjective well-being? Surprisingly mixed findings: The presumed link between equality and happiness fails to appear, at least where income inequality is concerned. Average happiness is as high in countries with great income inequality as in nations where income differences are small Veenhoven (2000) Including inequality in our regressions using the available data, we find that is has a negative effect, although its size and significance levels are both low. Di Tella and MacCulloch (2008) In the whole World Values Survey sample, the Gini coefficient has a positive (albeit not always significant) effect on life satisfaction. Guriev and Zhuravskaya (JEP 2008, p.157) Adding a World Bank estimate of the Gini coefficient for each national economy added no explanatory power to the well-being equation. Helliwell (2003) Stevenson & Wolfers, Inequality & Happiness 67

68 A Simple Framework Individual well-being: Average well-being in each country: Which implies: Average of log income, not Log of average income Equal and opposite effects Stevenson & Wolfers, Inequality & Happiness 68

69 Conditional Relationship Between GDP & MLD 2.0 Satisfaction and Inequality, Conditional on Log GDP Satisfaction = 0.30*log GDP (se=0.02) -0.22*inequality (se=0.14) Satisfaction E[Standardized satisfaction Log GDP] DNK CRI FIN COD AUS BDI BGD AUT CAN GUY NLD NZL GTM SWE CHEVEN BEL CAF BRACOL ESP ETH CZE IND IRL ISRMOZ JAM MEX PAN LAONOR MWI MDA UZB VNM DJI FRA GBR JOR GHAUSA NPL TKM LBR ARG HND PAK KGZ TJK MYS NERNGA BLR DEU SEN UGA ITA GIN RWA MDG EGY IDN NIC MLI HRV MRT CHL BFA GRC LUX DZA CMR CIV ECU JPN KAZ MAR MNG LTU KEN CHN KHM POL DOM HTI BIH IRN PHL SLV THAPRY ZMB TZA TTOTUN UKRYEM URY TCD SGP ROU SLE SVN PER SVK KOR BEN ARM ALBPRT AZE LKA EST RUS TUR TGO HUN MKD LVA GEOHKG COG ZWE BGR BOL ZAF AGO COM BWA NAM Inequality: E[Mean log deviation Log GDP] 0.8 (World Bank Inequality Data) Source: Betsey Stevenson and Justin Wolfers, Inequality and Subjective Well-Being. Stevenson & Wolfers, Inequality & Happiness 69

70 Distribution of Log GDP and Inequalty Frequency; Number of countries Frequency Frequency Frequency Variation in Log GDP and Mean Log Deviation $.25k $.5k $1k Log GDP per Capita: SD= $2k $4k Inequality: Mean Log Deviation (Gallup measure): SD=0.16 *Bars are 1/20th as wide *Bars are 1/20th as wide Inequality: Mean Log Deviation Log GDP: SD= Variation around the mean; Log points $8k Stevenson & Wolfers, Inequality & Happiness 70 Source: Betsey Stevenson and Justin Wolfers, Inequality and Subjective Well-Being. $16k $32k $64k $128k

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