Tian, Guoqiang and Yang, Liyan (2005): How are Income and Non-Income Factors Different in Promoting Happiness? An Answer to the Easterlin Paradox.
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This paper develops a formal economic theory to explain the Easterlin paradox-average happiness levels do not necessarily increase as countries grow wealthier. The theory analyzes the different roles of income and non-income factors in promoting people's happiness, and provides a foundation for studying happiness from the perspectives of social welfare maximization and individuals' self-interested rationality. It is shown that, for a certain class of economies, whether Easterlin paradox appears depends on the level of non-income factors. Happiness rises with income only up to a critical point that is determined by the level of the non-income factors; but once the critical income level is achieved, raising income further will lead to Pareto ineffcient allocations and decrease people's happiness. One policy implication is that government should promote a balanced growth between income and non-income factors. The empirical analysis provides some preliminary evidence consistent with the theory's predictions.
|Item Type:||MPRA Paper|
|Original Title:||How are Income and Non-Income Factors Different in Promoting Happiness? An Answer to the Easterlin Paradox|
|Keywords:||Easterlin Paradox, Happiness, Social Comparison, Pareto Optimality|
|Subjects:||D - Microeconomics > D6 - Welfare Economics > D62 - Externalities
D - Microeconomics > D6 - Welfare Economics > D61 - Allocative Efficiency; Cost-Benefit Analysis
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
|Depositing User:||Guoqiang Tian|
|Date Deposited:||12. Sep 2012 12:50|
|Last Modified:||17. Feb 2013 20:42|
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