There is an incredibly high correlation between average levels of happiness and average incomes — greater than 0.8. Angus Deaton actually beat us to this finding, and his analysis of these data is worth a close reading, (here).
There’s another striking finding in this graph: the relationship between happiness and log income appears nearly linear.
Thus, a 10 percent rise in income in the United States appears to increase happiness by about as much as a 10 perecent rise in income in Burundi.
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2. Even so, it is worth noting that a 10 percent rise in income in Burundi requires one-sixtieth as much income as a 10 percent rise in income in the U.S. Thus, even if the slope is three times as steep for rich countries as poor countries (as we estimate), this still means than an extra $100 has about a twenty-times-greater effect on happiness in Burundi than it would in the United States.
Comparisons like this make you think that foreign aid may not be such a bad idea.
