New research shows that money can buy happiness

A new study has found that money can buy happiness – to a certain degree.

Economist Eugenio Proto in the Centre for Competitive Advantage at the University of Warwick, along with other researchers found that once income reaches a certain level, around $36,000 (£22,000) life satisfaction levels peak.

In the poorest countries life satisfaction rises as a country’s wealth increases as people are able to meet their basic needs.

The researchers suggested that the happiness dip in the wealthiest countries is because more money creates higher aspirations, leading to disappointment and a drop in life satisfaction if those aspirations are not met.

Dr Proto said: “Whether wealth can buy a country’s happiness is a major question for governments. Many policy-makers, including in the UK, are interested in official measures of national well-being.

“Our new analysis has one very surprising finding which has not been reported before – that life satisfaction appears to dip beyond a certain level of wealth.

“In our study we see evidence that this is down to changes in the aspiration levels of people living in the richest countries.

“As countries get richer, higher levels of GDP (gross domestic product) lead to higher aspiration. There is a sense of keeping up with the Joneses as people see wealth and opportunity all around them and aspire to having more.

The study also found that people in countries with a GDP per capita of below $6,700 were 12 percent less likely to report the highest level of life satisfaction than those in countries with a GDP per capita of around $18,000.

However, once countries reach around $20,400 GDP per capita, the increase in happiness that higher wealth brings is less obvious. Between this level and the very highest GDP per capita level ($54,000), the probability of reporting the highest level of life satisfaction changes by no more than two percent.

The research correlates to the well-known ‘Easterlin Paradox’ – that the link between life satisfaction and GDP is more or less flat in richer countries.

What makes this study different, is that instead of continuing to increase or flatten, this analysis finds a small drop in life satisfaction once countries go beyond a level of GDP per capita of around $36,000.