30 thousand dollars - the level of economic happiness of the population

Money, family, personal happiness, as well as many other important moments in human life, have been discussed by scientists for centuries, and studies have been conducted to determine the relationship between these factors and the dependence of one sphere on the other. Today ForTrader.org magazine would like to acquaint you with the research of economists Eugene Proto from the University of Warwick and Aldo Rusticini from the University of Minnesota, who studied the relationship GDP per capita in various countries and happiness in the life of the average person.

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Income and happiness - the relationship of concepts

Economist Richard Easterlin of the United States in the distant '74 managed to discover during research that the level of income of citizens and the degree of their happiness are not particularly closely correlated, despite all the prejudices about it. The opinion was confirmed by time and statistics, according to which over the next 30 years, the average income of citizens has almost doubled, but the degree of happiness has remained at the same level. Based on this information, the scientist hypothesized that there is a certain threshold of income, the inflow of funds above which does not significantly change a person's life and does not make him much happier.

That's how it came to be. the term "Easterlin's paradox"which has been repeatedly confirmed by scientists later. However, it is necessary to take into account the mass of economic and psychological works in which a steady, albeit indirect, connection between income and the level of happiness of the average citizen has been proved. For example, Professor Ronald Inglehart of the University of Michigan, with the support of his colleagues, studied a number of population surveys conducted from 1981 to the beginning of the global financial crisis.

Based on the analysis of the data obtained, it was found that the level of happiness has increased in recent years in more than 85% countries (out of 52 surveys). Of course, if surveys had been taken into account in the period after 2008 (during the crisis), the results would have been less impressive. However, economic recessions are periodic, and the dynamics of happiness should be studied over a long period of time. As a result, the professor's team concluded that, in general, the population became happier to a greater extent due to the impact of increased freedom caused by democracy. This hypothesis was confirmed by other scientists who worked independently of Inglehart.

A New Approach to Research

It is worth saying that it is quite difficult to study the phenomenon of the influence of a country's economy and GDP in particular on the level of happiness of the population, because a person's mood changes under the influence of many other factors: what is good for one is negative for another, besides the influence of language barriers, religious considerations, cultural perception of the world. Therefore, Rusticini and Proto decided minimize the study of the impact of indirect factors and take into account exclusively the economic. To this end, they developed their own analytical method, abandoning the previous experience of their colleagues entirely.

First of all, they grouped the countries of Europe according to the level of GDP per citizen - there are about 50 different groups. Then they took into account the data of standard surveys, sifting out specific ones that are specific to the mentality of a particular state. As a result, the results of the survey were less skewed, as only standardized reports (the same for all countries) were examined.

The middle income trap

In the course of the study and analysis of the results, scientists came to a number of conclusions, the main of which can be expressed in several facts:

• The growth of the level of happiness with increasing GDP per capita is characteristic of the residents of those countries where this economic indicator is less than 10 thousand dollars.
• Residents of countries where the average GDP per capita is less than $6,700 say they are completely satisfied with life on 12% less often than those countries where this indicator is equal to 20 thousand dollars.
• Residents of countries where GDP per capita is $20,000 note an insignificant relationship between income and happiness. And statistics have proved it, as life satisfaction of citizens of rich countries is only 2% higher than that of citizens of less economically developed countries.
• The point of economic happiness of the population is approximately at the level of 30-33 thousand dollars of individual GDP - After reaching this point, money has almost no effect on life satisfaction. This is true for most countries in Europe, regardless of region or level of economic development.

Explaining that, What is the point of economic happiness, Rusticini and Proto offered an interesting inference. When a person's income increases, so does his need for money and his desire for it. After a certain point, however, the increase in income becomes less intense, while desires continue to grow. It turns out that in order to increase one's wealth one has to work more, which means that the level of income satisfaction decreases. In economic psychology this phenomenon is called "the middle income trap.". A person can no longer fully satisfy his needs, so the degree of happiness decreases.