Life Satisfaction and Keeping Up with Other Countries

Abstract

Micro income studies show that relative income of individuals-with respect to their colleagues, friends, etc.-affects their life satisfaction significantly. This paper attempts to extend these studies by using the idea that people may compare their well-being not only to well-being of their home country folks but also to well-being of other country citizens. Using data from national surveys of 55 countries, carried out from 1973 to 2011, we find that average life satisfaction of a country is significantly affected from how much that country is deprived of income compared to richer countries in the world. Furthermore, per capita income of a country only matters as far as it affects its relative position in the global income distribution. This result, gaining statistical significance after 1990s, is a potential explanation for the paradox that even though richer countries tend to be happier compared to poor ones, a country does not necessarily get happier as its income increases.