Saturday, April 19, 2008

How does probability of happiness vary with income level?

It has often been observed that cross-country comparisons show a strong positive relationship between average income levels and average happiness levels up to about 50 percent of U.S. income, with no clear relationship after that.

However, a different picture emerges when we group countries according to income levels and look at percentages of people who claim to be satisfied with life as a whole. I have used data on percentages of lower, middle and upper income groups who are satisfied with life as a whole for 66 countries. The data was sourced from surveys conducted over the period 1999 - 2002. (See: Ronald Inglehart et al, Human Beliefs and Values, Siglo XXI Editores, Mexico, 2004, A 170.) Observations for each country were ranked according to average income as a percentage of U.S. levels in 2000.

The results are shown below. The average percentages for countries in the 5th quintile (average income of 76 percent of the U.S. level in 2000) who are satisfied with life as a whole is considerably higher than for the 4th quintile (average income of 46 percent of the U.S. level).

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