Money and happiness: the income-happiness correlation is higher when income inequality is higher

Abstract Has the income-happiness correlation changed over time? If so, what predicts such changes? We tested these questions in diverse economic, political, and cultural contexts. Drawing on nationally representative data, we found that the income-happiness correlation has increased in the U.S. since 1972, as GDP per capita and income inequality increased (Study 1). Study 2 examined an income-life satisfaction correlation in nationally representative surveys between 1978 and 2011 in Japan. Unlike in the U.S., there was no clear increase in the income-life satisfaction correlation over time. We next examined the income-life satisfaction correlations in 16 European countries and found that on average the income-life satisfaction correlation has increased since 1970, and it was particularly high in years of high GDP per capita and high-income inequality (Study 3). Finally, we found that among Latin American countries, the income-life satisfaction correlation has, on average, decreased since 1997, as income inequality has decreased (Study 4). Over the last 5 decades, the income-happiness correlation has increased, not decreased, in the U.S. and several European countries. The income-happiness correlation tends to get higher when both GDP per capita and income inequality are high, whereas it tends to get lower when GDP per capita and/or income inequality are low. These findings suggest the importance of accounting for income inequality as well as national wealth in understanding the role of money in happiness.