Happiness-Income Relationship: A Cross-Country Comparison

Abstract

The link between happiness and income has been widely studied, yet countries show different patterns as they grow. Higher income often improves people’s lives, but many findings also show that happiness does not rise at the same pace in richer nations. These varied results are often highlighted in debates like the Easterlin Paradox, which suggests that while happiness rises with income in the short run, it tends to stop increasing significantly, as countries move to higher income levels. This study examines the complex relationship between the income and happiness across 15 countries using data from the World Value Survey (1990-2022) and World Happiness Report (2012-2024). The research covers the time span of a 34-year period (1990-2024). The study applies linear regression models to analyse interlinkages between income and happiness for selected countries. The findings validate the Easterlin Paradox, demonstrating that the income significantly influences happiness in developing economies, while its effect shows diminishing nature in economically developed nations. The study reveals that high-income countries experience happiness saturation, where additional income growth contributes to minimal well-being gains, while middle and lower-income countries continue experiencing positive happiness trends which are tied to economic growth. These findings have significant implications for policymaking which further suggests that development strategies should evolve from income-centric approaches in emerging economies to major well-being frameworks in advanced nations, ensuring institutional quality, social trust, and economic security alongside income growth.