| Modern states strive to increase the well-being of their citizens by promoting economic growth, but empirical work has shown that growth in many countries has not been accompanied by an increase in happiness. This conclusion implies a change in our understanding of the effectiveness of current government policies. In this thesis, the empirical work concerning the relationship between income and subjective well-being is reviewed and interpreted according to the relative income hypothesis. A model is developed and used to examine whether income redistribution geared towards increasing income equality can increase overall happiness. In a two-person economy, it is shown that due to the nature of the relative income interpretation, greater happiness from redistribution is unlikely. Fixing the relative income relationship increase happiness by decreasing the disutility of labor, but this policy may also have unwanted side effects. Other models and ideas are also considered, yet the same conclusion is reached. |
