Absolute Income, Relative Income, and Happiness

54 Pages Posted: 20 May 2005

See all articles by Richard J. Ball

Richard J. Ball

Haverford College - Department of Economics

Kateryna Chernova

Exelon Corporation

Date Written: May 2005

Abstract

This paper uses data from the World Values Survey to investigate how an individual's self-reported happiness is related to (i) the level of her income in absolute terms, and (ii) the level of her income relative to other people in her country. The main findings are that (i) both absolute and relative income are positively and significantly correlated with happiness, (ii) quantitatively, changes in relative income have much larger effects on happiness than do changes in absolute income, and (iii) the effects on happiness of both absolute and relative income are small when compared to the effects several non-pecuniary factors.

Keywords: subjective well-being, relative income, happiness

JEL Classification: D31, D63, I31

Suggested Citation

Ball, Richard J. and Chernova, Kateryna, Absolute Income, Relative Income, and Happiness (May 2005). Available at SSRN: https://ssrn.com/abstract=724501 or http://dx.doi.org/10.2139/ssrn.724501

Richard J. Ball (Contact Author)

Haverford College - Department of Economics ( email )

370 Lancaster Avenue
Haverford, PA 19041
United States
610-896-1437 (Phone)
610-896-1041 (Fax)

Kateryna Chernova

Exelon Corporation ( email )

37th Floor, 10 South Dearborn Street
Post Office Box A-3005
Chicago, IL 60690-3005
United States

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