The impact of the financial crisis on happiness in affluent European countries

Abstract

The impact of income on happiness has received much academic attention. In general, countries with a higher income per capita have higher levels of happiness; nevertheless, as Easterlin has observed, an increase in income is not necessarily correlated with an increase in happiness. Easterlin's paradox has been central to the debate. By contrast, studies do not, in general, analyse the opposite situation; that is, whether a decline in income will have a negative impact on the level of happiness. Based upon recent data from the European Social Survey this article tries to fill this gap by looking at changes in happiness in the wake of the recent financial crisis and consequent change in income as measured by gross domestic product per capita. The article, using data for 15 European countries released in 2011 covering the year 2010, concludes that such a causal relationship cannot be confirmed on the basis of the present limited data. The reason why the relationship cannot be confirmed needs to be explored further.