The Importance of Wealth for Subjective Well-Being

Abstract

It is widely assumed that since income is usually found to account for a relatively small proportion of the variance across individuals in self-reported well-being, money does not matter for personal happiness. This hypothesis is reexamined in this paper by including measures of household wealth alongside the more usual household income measure in regression equations of life satisfaction. Using data drawn from four large population surveys from four different countries, evidence is found indicating that wealth generally matters at least as much as income. It is thus concluded that economic circumstances explain more of the variation in individual well-being than previously thought. Nevertheless, the size of these wealth and income effects is still small.