Is It Income Adaptation or Social Comparison? The Effect of Relative Income on Happiness and the Easterlin Paradox in India

Income adaptation and social comparison are the standard explanations for the lack of a direct long-run relationship between income and happiness. Individuals evaluate life satisfaction relative to past income or income of others. As individual income increases, so also expectations and the mismatch between income and aspirations hold down the happiness level. When everyone’s income increases, the relative position of individuals remains the same, and hence, average happiness does not increase commensurately with increase in income. The validity of the Easterlin Paradox and the relevance of income adaptation and social comparison explanations in India are examined by replicating cross-country analysis with cross-states analysis using the World Values Survey data for 1990–2014 and by applying ordered probit panel estimation. The empirical analysis shows that the long-run income-life satisfaction gradient is negative across states and over time. The panel estimates show the negative relative income effects dominate the positive absolute income effect. There is perfect income adaptation at the individual and aggregate levels. The immediate neighbourhood income—the state average income—is the relevant reference group income. Reducing the income gap and augmenting income sources of the poor may reduce the effect of relative comparison and increase happiness level in the long run in India.

Easterlin paradox revisited: Do increases in income bring higher levels of income satisfaction?

In this paper, we examine the relationship between income and income satisfaction in the pool of developed European economies, for the period between 2002 and 2018. Although the nexus between income and most subjective well-being indicators is frequently investigated in prior studies, the research investigating the relationship between income and income satisfaction over time is non-existing. We find that during the observed period real disposable household income significantly increased, while the satisfaction with household income remained constant. Furthermore, the analysis within hierarchical linear modeling shows that while between-country variations in income affect income satisfaction, this is not the case for income variations over time. Our findings support the notion of the Easterlin paradox, which indicates that in the long-run increases in income do not lead to higher levels of well-being. Explanations for such results may be found in the social comparison theory, hedonic adaptation theory and aspiration level theory: increasing income does not bring positive effects on income satisfaction due to relevance of the relative and not the absolute income, adaptation to income changes, or higher levels of aspirations resulting from income rise.

Social capital dimensions and individual happiness in Indonesia: The micro-level study

The Easterlin Paradox triggers the use of happiness as a measure of Wellbeing. The welfare can be measured by monetary measurement and comprehensive to subjective measurement, one of which is social capital. This study shows the influence of social capital on the level of individual happiness in Indonesia. The study uses the 2007 and 2014 Indonesia Family Life Survey (IFLS) data. Using the Logit Regression Panel, the results show a positive influence on social capital, which contains trust, social networks, and sanctions and norms on several dimensions on the level of individual happiness. We also found that individual happiness levels are based on age, marital status, income level, education level, health status. Therefore, we need programs that prioritize community participation to increase informal social interaction and the need for effective programs to accelerate community income.

The Determinants Of Happiness: Empirical Evidence Of Java Island

Happiness research on economics has increasingly developed since Easterlin Paradox appeared. This research tries to analyze the determinants of happiness in Java Island, Indonesia. We use data from the Happiness Measurement Survey 2017 conducted by the BPS-Statistic Agency of Indonesia. Taking 23,456 observations, we employ binary logistic regression to test the effects of 13 independent variables on happiness. The results showed that income, education, health, social relations with family and society, environmental conditions, and a meaningful life affect happiness. In general, these findings strengthen some previous studies findings.

Determinants Of Subjective Well-Being: Evidence Of Urban Indonesia

Happiness studies on economics have increasingly arisen since the uprising of the Easterlin Paradox phenomenon. Besides its populous side, the urban area has more complicated problems than rural. This research aims to analyze the determinants of happiness in urban Indonesia. We use the latest data from the Happiness Measurement Survey 2017 conducted by the BPS-Statistic Agency of Indonesia. Taking 30,665 observations, we apply the Ordered Logit Estimation technique (including G2-likelihood ratio test, Wald statistical test, and Hosmer-Lemeshow goodness of fit test) to analyze the determinants of happiness. We found that Easterlin Paradox does not exist in urban area Income, education, health, marrying, internal-external relationship, a satisfying job, positive feeling, and a meaningful life have a positive impact on happiness. Generally, these findings support some previous studies' findings.