This setting lets you change the way you view articles. You can choose to have articles open in a dialog window, a new tab, or directly in the same window.
Open in Dialog
Open in New Tab
Open in same window

Journal of Economic Literature: Vol. 46 No. 1 (March 2008)

JEL Volume. 46, Issue 1 | leftPrevious ArticleNext Articleright

Expand

Quick Tools:

Print Article Summary Email Link to this Article Export Citation
Sign up for Email Alerts Follow us on Twitter Subscription Information
(Institutional Administrator Access)

Explore:

JEL - All Issues

JEL Forthcoming Articles JEL Indexes (Members Only)

Relative Income, Happiness, and Utility: An Explanation for the Easterlin Paradox and Other Puzzles

Article Citation

Clark, Andrew E., Paul Frijters, and Michael A. Shields. 2008. "Relative Income, Happiness, and Utility: An Explanation for the Easterlin Paradox and Other Puzzles." Journal of Economic Literature, 46(1): 95-144.

DOI: 10.1257/jel.46.1.95

Abstract

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.

Article Full-Text Access

Full-text Article

Authors

Clark, Andrew E. (Paris School of Economics and IZA)
Frijters, Paul (Queensland U Technology)
Shields, Michael A. (U Melbourne)

JEL Classifications

I31: General Welfare


Journal of Economic Literature



AEA Member Login:


Quick Tools:

Email Link to this Issue

Sign up for Email Alerts

Follow us on Twitter

Subscription Information
(Institutional Administrator Access)

Explore:

JEL - All Issues

JEL - Forthcoming Articles

JEL Indexes (Members Only)

AEA Journals

Virtual Field Journals

AEAweb | AEA Journals | Contact Us