Does More Income Buy More Happiness? Empirical Evidence from the World Values Survey in Pakistan

Authors

Samia Awais(1) Samia Awais Corresponding author Affiliation PhD Scholar, Federal Urdu University of Arts, Sciences & Technology, Islamabad, Pakistan Email addresssamia.awais@gmail.com Other articles by this author , Shahzad Kouser(2) Shahzad Kouser Affiliation Associate Professor, COMSATS University Islamabad, Pakistan Other articles by this author , Ihtesham-ul-Haq Padda(3) Ihtesham-ul-Haq Padda Affiliation Associate Professor, Federal Urdu University of Arts, Sciences & Technology, Islamabad, Pakistan Other articles by this author

  1. PhD Scholar, Federal Urdu University of Arts, Sciences & Technology, Islamabad, Pakistan
  2. Associate Professor, COMSATS University Islamabad, Pakistan
  3. Associate Professor, Federal Urdu University of Arts, Sciences & Technology, Islamabad, Pakistan

https://doi.org/10.36923/jcmi.v6i1.639

Ask AI (Dimensions) Download PDF

Abstract

This study examines the empirical validity of the Easterlin Paradox in the context of Pakistan, drawing on nationally representative microdata from 1,995 adult respondents in the most recent Wave 7 of the World Values Survey. The paradox posits that while income is positively associated with happiness at a given point in time, long-term income increases do not necessarily lead to sustained improvements in subjective well-being. We examine this relationship through a combination of descriptive statistics and a two-level mixed-effects ordered logistic regression model, which accounts for both individual- and community-level heterogeneity. The analysis confirms that income has a statistically significant positive effect on happiness; however, the inclusion of a squared income term reveals a non-linear, concave relationship, indicating diminishing marginal returns to income—a core tenet of the Easterlin Paradox. Beyond income, a range of non-material factors such as good health, perceived autonomy, confidence in institutions, and social class emerge as significant predictors of happiness. Conversely, factors like food insecurity and being a victim of crime negatively impact subjective well-being. These findings align with the capability approach and recent global literature emphasizing the multidimensional nature of happiness. The study contributes to filling a critical gap in South Asian happiness research by providing country-specific, methodologically rigorous evidence from Pakistan. Policy implications suggest the need for a broader, human-centered development strategy that prioritizes healthcare, education, institutional trust, and social protection, rather than focusing narrowly on income growth. By shifting the focus toward inclusive and holistic well-being, Pakistan can better align its development goals with what truly enhances the lives of its citizens.

Article information

Keywords
Easterlin ParadoxHappinessSubjective Well-beingEconomicsIncome Capacity
Section
Articles
Issue
Vol. 6 No. 1 (2025)
Submitted
March 16, 2025
Accepted
May 26, 2025
Published
June 30, 2025
Corresponding author
Samia Awais
Check for updates
Check for updates

References

  1. Andersen, R., & Curtis, J. (2012). The impact of class positions on subjective well-being in developed and developing countries. International Journal of Public Opinion Research, 24(3), 351–366. Google Scholar PubMed WorldCat
  2. Awan, M. S., Waqas, M., & Aslam, M. A. (2011). Multidimensional poverty in Pakistan: Case of Punjab province. Journal of Economics and Behavioral Studies, 3(2), 133–144. DOI: https://doi.org/10.22610/jebs.v3i2.264 Google Scholar PubMed WorldCat
  3. Brickman, P., & Campbell, D. T. (1971). Hedonic relativism and planning the good society. In M. H. Appley (Ed.), Adaptation-level theory (pp. 287-305). New York: Academic Press. Google Scholar PubMed WorldCat
  4. Clark, A. E., Flèche, S., Layard, R., Powdthavee, N., & Ward, G. (2018). The origins of happiness: The science of well-being over the life course. Princeton, NJ: Princeton University Press. DOI: https://doi.org/10.2307/j.ctvc77dgq Google Scholar PubMed WorldCat
  5. Clark, A. E., Frijters, P., & Shields, M. A. (2008). Relative income, happiness, and utility: An explanation for the Easterlin paradox. Journal of Economic Literature, 46(1), 95–144. DOI: https://doi.org/10.1257/jel.46.1.95 Google Scholar PubMed WorldCat
  6. Deaton, A. (2008). Income, health, and well-being around the world: Evidence from the Gallup World Poll. Journal of Economic Perspectives, 22(2), 53–72. DOI: https://doi.org/10.1257/jep.22.2.53 Google Scholar PubMed WorldCat
  7. Diener, E., Diener, M., & Diener, C. (1995). Factors predicting the subjective well-being of nations. Journal of Personality and Social Psychology, 69(5), 851–864. DOI: https://doi.org/10.1037/0022-3514.69.5.851 Google Scholar PubMed WorldCat
  8. Diener, E., Oishi, S., & Lucas, R. E. (2003). Personality, culture, and subjective well-being: Emotional and cognitive evaluations of life. Annual Review of Psychology, 54, 403–425. DOI: https://doi.org/10.1146/annurev.psych.54.101601.145056 Google Scholar PubMed WorldCat
  9. Diener, E., Suh, E., Lucas, R. E., & Smith, H. L. (1999). Subjective well-being: Three decades of progress. Psychological Bulletin, 125(2), 276–302. DOI: https://doi.org/10.1037/0033-2909.125.2.276 Google Scholar PubMed WorldCat
  10. Dolan, P., Peasgood, T., & White, M. (2008). Do we really know what makes us happy? A review of the economic literature on the factors associated with subjective well-being. Journal of Economic Psychology, 29(1), 94–122. DOI: https://doi.org/10.1016/j.joep.2007.09.001 Google Scholar PubMed WorldCat
  11. Easterlin, R. A. (1974). Does economic growth improve the human lot? In P. A. David & M. W. Reder (Eds.), Nations and households in economic growth (pp. 89–125). New York: Academic Press. DOI: https://doi.org/10.1016/B978-0-12-205050-3.50008-7 Google Scholar PubMed WorldCat
  12. Easterlin, R. A., & McVey, L. A. (2009). Happiness and growth the world over: Time-series evidence on the happiness–income paradox (Discussion Paper No. 406). IZA. DOI: https://doi.org/10.2139/ssrn.1369806 Google Scholar PubMed WorldCat
  13. Easterlin, R. A., Morgan, R., Switek, M., & Wang, F. (2012). China’s life satisfaction, 1990–2010. Proceedings of the National Academy of Sciences, 109(25), 9775-9780. DOI: https://doi.org/10.1073/pnas.1205672109 Google Scholar PubMed WorldCat
  14. Ferrer-i-Carbonell, A., & Frijters, P. (2004). How important is methodology for the estimates of the determinants of happiness? Economic Journal, 114(497), 641–659. DOI: https://doi.org/10.1111/j.1468-0297.2004.00235.x Google Scholar PubMed WorldCat
  15. Frank, R. H. (2005). Positional externalities cause large and preventable welfare losses. American Economic Review, 95(2), 137–141. DOI: https://doi.org/10.1257/000282805774670392 Google Scholar PubMed WorldCat
  16. Frederick, S., & Loewenstein, G. (1999). Hedonic adaptation. In D. Kahneman, E. Diener, & N. Schwarz (Eds.), Well-being: The foundations of hedonic psychology (pp. 302-329). New York: Russell Sage Foundation. Google Scholar PubMed WorldCat
  17. Frey, B. S., & Stutzer, A. (2002). What can economists learn from happiness research? Journal of Economic Literature, 40(2), 402–435. DOI: https://doi.org/10.1257/jel.40.2.402 Google Scholar PubMed WorldCat
  18. Graham, C., & Pettinato, S. (2002). Frustrated achievers: Winners, losers and subjective well-being in new market economies. Journal of Development Studies, 38(4), 100–140. DOI: https://doi.org/10.1080/00220380412331322431 Google Scholar PubMed WorldCat
  19. Helliwell, J. F., & Putnam, R. D. (2004). The social context of well-being. Philosophical Transactions of the Royal Society B: Biological Sciences, 359(1449), 1435–1446. DOI: https://doi.org/10.1098/rstb.2004.1522 Google Scholar PubMed WorldCat
  20. Helliwell, J. F., Layard, R., Sachs, J. D., Aknin, L. B., De Neve, J.-E., & Wang, S. (Eds.). (2023). World Happiness Report 2023 (11th ed.). New York: Sustainable Development Solutions Network. Google Scholar PubMed WorldCat
  21. Jabeen, F., & Khan, F. A. (2016). An empirical analysis of individual’s happiness in Pakistan. PUTAJ–Humanities and Social Sciences, 23(2), 181–199. Google Scholar PubMed WorldCat
  22. Knight, J., & Gunatilaka, R. (2010). The rural–urban divide in China: Income but not happiness? Journal of Development Studies, 46(3), 506–534. DOI: https://doi.org/10.1080/00220380903012763 Google Scholar PubMed WorldCat
  23. Layard, R. (2006). Happiness: Lessons from a new science. London, England: Penguin Publishing Group. Google Scholar PubMed WorldCat
  24. Naeem, M., & Khalid, R. (2015). Psychological predictors of subjective well-being in Pakistani university students. Pakistan Journal of Psychological Research, 30(1), 39–52. Google Scholar PubMed WorldCat
  25. Rabe-Hesketh, S., & Skrondal, A. (2022). Multilevel and longitudinal modeling using Stata (4th ed.). College Station, TX: Stata Press. Google Scholar PubMed WorldCat
  26. Rafique, R., & Iqbal, Z. (2020). Impact of social support and income satisfaction on subjective well-being in Pakistan. FWU Journal of Social Sciences, 14(3), 66–76. Google Scholar PubMed WorldCat
  27. Runciman, W. G. (1966). Relative deprivation and social justice: A study of attitudes to social inequality in twentieth-century England. Berkeley, CA: University of California Press. Google Scholar PubMed WorldCat
  28. Sacks, D. W., Stevenson, B., & Wolfers, J. (2012). The new stylized facts about income and subjective well-being. Emotion, 12(6), 1181–1187. DOI: https://doi.org/10.1037/a0029873 Google Scholar PubMed WorldCat
  29. Sen, A. (1999). Development as freedom. Oxford, England: Oxford University Press. Google Scholar PubMed WorldCat
  30. Stevenson, B., & Wolfers, J. (2008). Economic growth and subjective well-being: Reassessing the Easterlin paradox. Brookings Papers on Economic Activity, 2008(1), 1–87. DOI: https://doi.org/10.1353/eca.0.0001 Google Scholar PubMed WorldCat
  31. Veenhoven, R. (2011). Gender and happiness. International Journal of Happiness and Development, 1(2), 216–235. Google Scholar PubMed WorldCat
  32. Waqar, S., & Waqar, S. (2020). Determinants of happiness in Pakistan: Evidence from HIES data. Journal of Economic Studies, 41(2), 54–66. Google Scholar PubMed WorldCat
  33. WVS. (2022). World Values Survey Wave 7 (2017–2022) Integrated Dataset. JD Systems & World Values Survey Association. Retrieved from: https://www.worldvaluessurvey.org Google Scholar PubMed WorldCat