April 2013

IZA DP No. 7353: Subjective Well‐Being and Income: Is There Any Evidence of Satiation?

shorter version published in: American Economic Review: Papers & Proceedings, 2013, 103 (3), 598-604

Many scholars have argued that once "basic needs" have been met, higher income is no longer associated with higher in subjective well-being. We assess the validity of this claim in comparisons of both rich and poor countries, and also of rich and poor people within a country. Analyzing multiple datasets, multiple definitions of "basic needs" and multiple questions about well-being, we find no support for this claim. The relationship between well-being and income is roughly linear-log and does not diminish as incomes rise. If there is a satiation point, we are yet to reach it.