If money does not by much happiness, what does?: A multilevel analysis on the impact of absolute and relative income, social values and modernization on subjective well-being in Europe

Introduction and research questions from the rich literature on happiness and subjective well-being we know that money does not buy happiness (Diener, 1999; headey, Muffels & Wooden, 2008). this is known as easterlin’s paradox, which posits that beyond a certain level of gross domestic product (gDp) per capita wealthier nations are not better off in terms of subjective well-being than less wealthy nations, whereas within countries absolute income pays off in terms of happiness though at a diminishing rate (easterlin, 1974, 2001, 2003). the easterlin paradox is explained by the mechanism of habituation or adaptation, according to which people are presumed to be in a sort of ‘hedonic treadmill’: due to rising aspirations, increases in wealth do not lead to steady increases in happiness. the paradox is challenged in a seminal paper by Stevenson and Wolfers (2008), who used the World values Survey, the