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Income growth and happiness: Reassessment of the Easterlin Paradox

Beja Jr., Edsel (2014): Income growth and happiness: Reassessment of the Easterlin Paradox.

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Abstract

This paper presents evidence of a positive but very small long run relationship between income growth and happiness, evidence that can disprove the Easterlin Paradox. However, the paper argues that there is actually reason to sustain the paradox because it finds the magnitude of the estimated relationship too small to suggest that income growth has substantial consequence in improving happiness over the long-term. Certainly, the evidence suggests that happiness is more than about raising incomes. This paper argues that a rejection of the paradox is acceptable if and only if the empirical findings indicate economic significance.

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