Munich Personal RePEc Archive

The economics of happiness and psychology of wealth

Czapinski, Janusz (2013): The economics of happiness and psychology of wealth.

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Abstract

The “Easterlin paradox” suggests that there is no link between the economic development of a society and the overall happiness of its members, yet wealthy societies and people are happier than those with low income. Using recent data from Social Diagnosis (www.diagnoza.com) and several surveys on a broader array of countries, I verify a few hypotheses on the relationship between income and psychological well-being at micro and macro levels. The main factor which differentiates the pattern of relationship is the level of income. In poor societies and individuals, income affects well-being but in wealthy societies and individuals, the direction of the relationship is reversed: well-being determines income. Money buys happiness when income is too low to satisfy basic needs, and happiness brings money when income satisfies basic needs.

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