Money makes you happy? Depends on your personality

We show a non monotonic relationship between income and life satisfaction, and life satisfaction decreases for larger values of income. This decline poses a puzzle: if higher income may produce a reduction in life satisfaction, why do individuals strive to increase personal wealth? We provide and successfully test a potential explanation bringing into the analysis personality traits. Stronger motivation can induce aspiration to higher individual income, and hence of realized outcome, but at a decreasing rate. As a consequence, the gap aspiration and realization increases, and the gap may compensate the direct positive e�ffect of income on life satisfaction