IJUP08 - Universidade do Porto

The relativity of happiness: Portugal and the EU
J.P. Fique 1 , D.A. Sá 2
1Undergraduate student, Faculty of Economics, University of Porto, Portugal.
2Undergraduate student, Faculty of Economics, University of Porto, Portugal.
“Life is a progress from want to want, not from enjoyment to enjoyment”
Samuel Johnson, 1776
What makes us happy? This everlasting question gained recently a good amount of
attention from Economics. Until this unexpected focus from Economics, psychologists
have been studying this matter, which became a valuable support for economic analysis of
happiness.
In the present analysis it will be considered the relation between happiness and income.
The reference in this relation is the work developed by Richard A. Easterlin (1974, updated
in 1995), the so called Easterlin Paradox consists in the “paradox of substantial real income
growth in Western countries over the last fifty years, but without any corresponding rise in
reported happiness levels” (Clark, A.E., Frijters, P., Shields, M.A, 2006) [1] . But, a second
literature has emerged pointing that money does matter. The result of the reconcilement of
Easterlin Paradox and this second literature is that happiness is relative, it depends on both
external and internal reference points.
Extending this theoretical result, we can consider as Kapteyn et al (1976) as previously
argued, that reference groups include whole countries. We propose to question if the low
rank of Portugal in terms of Life Satisfaction is a result of considering the European Union
as a reference group. Hence, the low Life Satisfaction results would be a consequence of
the difference between Portugal’s income and the supposed reference group.
To do so, we will use data available from Eurobarometer. In terms of theoretical
orientation, it will follow the perspective of “Clark, A.E., Frijters, P., Shields, M.A,
2006” [1] in close propinquity.
This analysis the proposition of the application of a theoretical perspective to the
understanding of happiness, which will be used in our ongoing research project “Happiness
and the Human Development Index: The case of Lisbon and Porto”. Therefore, it will aim
to favor a discussion about this topic and not present actual results. What we propose to do
is identify in the Eurobarometer data results predicted by this line of thought.
References:
[1] Clark, A.E., Frijters, P., Shields, M.A. (2006), Income and happiness: Evidence, explanations
and economic implications, Paris-Jourdan Sciences Economiques, WP nº 2006-24.
[2] Easterlin, R.A. (2001), Income and happiness: towards a unified theory, in The Economic
Journal, 111 (July), 465-484. © Royal Economic Society 2001. Published by Blackwell Publishers,
108 Cowley Road, Oxford OX4 IJF, UK and 350 Main Street, Malden, MA 02148, USA
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