In 1974 Richard Easterlin presented data showing that there is no relationship between economic growth and average happiness in the USA, yet a higher personal income did go with greater individual happiness in that nation. This phenomenon came to be known as the ‘Easterlin Paradox’. Easterlin explains this pattern using the relative income theory, which holds that the positive effect of income increase is offset by: (a) adaptation to income change and (b) comparison to the income of compatriots. There is discussion as to whether this pattern is universal and, in this context, Easterlin (Easterlin et al. 2010) claims that the enormous economic growth in South-Korea over the last decade has not lead to an increase in average happiness. In this paper we report an empirical check of this claim, using another dataset from South-Korea. We also check whether the relative income theory applies in this case. Contrary to Easterlin’s claim, we found that South-Koreans became happier and that the relative happiness theory did not apply in this case. It appears there is more in the relationship between economic growth and average happiness than Easterlin thought in 1974.
Department of Applied Economics