Income - Happiness Relationship: “The More the Better?” Evolutionary Psychology Approach

Abstract

The paper’s aim is to analyze the influence of absolute and relative income growth on happiness level of an individual. The paper uses the admixture of current Psychology science’s theoretical approaches and Economic science’s quantitative approach. Specifically, the paper used Lyubomirsky’s et al. (2005) Set Point theory and evolutionary psychology’s theoretical approach to conduct fundamental analysis of happiness and its influencing factors. Data are based on the individual data of “World Values Survey” waves three, four, five and six. The empirical methods used are OLS, Logit and OLS IV regressions.

The analysis demonstrates two findings. First, that predictions based on evolutionary psychology’s theoretical approach are fully confirmed by the models’ findings. Secondly, the paper demonstrates the positive correlation of relative and absolute income with happiness level. Relative income in terms of social status is economically more significant than absolute income in terms of the influence of GDP per capita and previous year’s GDP per capita growth rate. However, when considering the net effects of absolute income growth and discords that are connected with it, the positive influence of increased absolute income is not necessarily the case. Evolutionary psychology’s theoretical approach and the paper’s empirical findings based on it were demonstrated as the tool to better estimate the net influence of increased absolute income on happiness level of an individual.