Money does indeed buy happiness, and more money leads to more happiness, according to a study released Monday by economic researchers.
While a link between money and well-being is not surprising, the new study contradicts some earlier research which suggested the effect diminished above a certain level of income which allows people to meet basic needs.
University of Michigan economists Betsey Stevenson and Justin Wolfers say in their paper in the May 2013 American Economic Review, Papers and Proceedings that there is no evidence of a “satiation” point in the money-happiness equation.
“We find no evidence of a satiation point,” they wrote.
“The income-well-being link that one finds when examining only the poor, is similar to that found when examining only the rich.”
They found that the link is valid “when making cross-national comparisons between rich and poor countries as when making comparisons between rich and poor people within a country.”
The study is the latest in a hotly debated field, and appears to contradict a theory dubbed the “Easterlin Paradox,” developed in 1974 by Richard Easterlin, now at the University of Southern California.
Easterlin’s research, which drew notably on surveys from Japan, suggested little or no increase in national happiness despite the country’s post-World War II economic miracle.
Later research pointed to annual incomes in the United States of $75,000 and in poorer countries in a range of between $8,000 and $25,000, beyond which money no longer impacts well-being.
But Stevenson and Wolfers said their research showed the Easterlin Paradox and similar theories are just wrong.
“If there is a satiation point, we are yet to reach it,” they wrote.
“We find no evidence of a significant break in either the happiness-income relationship, nor in the life satisfaction-income relationship, even at annual incomes up to half a million dollars.”
Stevenson and Wolfers used data from three different cross-country studies, including the Pew Global Attitudes survey, the Gallup World Poll and the International Social Survey Program.
“They show a clear relationship between the average level of well-being in a country with its average … income,” they wrote.
“While the gains from income slow down as countries get richer, they never disappear. Doubling the income of a country has the same impact on the well-being of its citizens regardless of the initial starting point.”
Stevenson and Wolfers, who is also a nonresident fellow at the Brookings Institution, have been studying the field for years, and the latest research supports their conclusions in a 2008 study.
“While the idea that there is some critical level of income beyond which income no longer impacts well-being is intuitively appealing, it is at odds with the data,” they concluded.