Economic growth in industrialized countries over the past few decades did not result in improved subjective well-being (SWB) of citizens.
This finding, known as the “Easterlin Paradox,” is mainly a result of the fact that subjective well-being is a positive function of income but a negative function of relative position. Recognition of the impact of relative standing on well-being in the discipline of economics dates back to the times of Adam Smith and Karl Marx. The current paper builds on existing studies and investigates the impact of relative standing on SWB in households in urban Ethiopia using three rounds of data spanning a decade. The data set contains detailed information on comparisons of respondents with others, with oneself over time, and with anticipated changes in the future, which enables to compare the differences in the magnitude of the impact of these variables on SWB.
