ABSTRACT
This chapter explores a selection of the evidence on the relationship between income and subjective wellbeing, examining individual, community, and national levels. While higher income may be considered to relate directly to higher subjective wellbeing, research reveals a more nuanced picture. Studies on individual income and life satisfaction indicate diminishing marginal returns, with additional income having a greater impact on those with lower income levels. There is also some evidence of satiation and turning points at the higher end of the income distribution. The measure of subjective wellbeing used influences the relationship, with some measures showing no significant associations. Methodological challenges and confounding factors complicate interpretations of the evidence. At the community and national levels, the relationship changes. The Easterlin Paradox suggests that increases in gross domestic product do not consistently lead to higher life satisfaction over time. Potential explanations include adaptation, social comparison, and loss aversion. Interventions provide insights into the causal effects of income on subjective wellbeing. Studies on individual interventions, like lottery wins, yield mixed results, while cash transfers have some positive effects, particularly in low-income countries. Overall, the link between higher income and subjective wellbeing is complex, but lower individual income is consistently associated with lower wellbeing, and successful policy interventions will address deprivation. Income redistribution interventions, such as cash transfers, need to account for implementation contexts and system-level factors to effectively enhance subjective wellbeing. Further research should explore the influence of systems and implementation contexts on income redistribution initiatives.
