E 1754
business case with assumption on the legal form
of the business, its size, location, and nature of its
operations. This allows for transparency, but
a number of shortcomings have been recognized
related to the geographical location of reference
(an economy’s largest business city), the selected
business form, standardization of case scenarios,
subjectivity of time measures, and an assumption
of fully available information for the businesses.
Discussion
The topics included in the index have undergone
changes in the years. One of the topics previously
included – employing workers – has been criti-
cized (e.g., Berg & Cazes, 2007) for its implica-
tions with regard to flexible employment
regulation and the weak evidence for a strong
link between labor market deregulation and
improved economic performance. Further work
on a new work protection indicator is currently
taking place. Further methodological weaknesses
have been pointed out by the World Bank Inde-
pendent Evaluation Group (2008) and Høyland,
Moene, and F.Willumsen (2008), especially with
regard to the relationship between the ranking
and the underlying factor, the business climate,
and the implication this can have in terms of
▶ policy analysis and targeted policy measures
for improving country’s position.
Cross-References
▶ Economic Efficiency
▶ Governance
▶ Index Construction
▶ Indicators, Quality of Life
▶ Policy Analysis
▶ Taxes
▶ Weighting Schemes
References
Berg, J., & Cazes, S. (2007). The doing business indi-
cators: Measurement issues and political implications
(Economic and Labour Market Paper 2007/6). Geneva,
Switzerland: International Labour Organization.
East Germany
Høyland, B., Moene, K., & Willumsen, F. (2008). Be
careful when doing business. Report for the Norwe-
gian Ministry of Foreign Affairs. Oslo, Norway:
ESOP.
World Bank. (2003). Doing business in 2004: Under-
standing regulation. Washington, DC: Author.
World Bank. (2010). Doing business 2011: Making
a difference for entrepreneurs. Washington, DC:
World Bank and International Finance Corporation.
World Bank Independent Evaluation Group. (2008).
Doing business: An independent evaluation-taking
the measure of the World Bank-IFC doing business
indicators. Washington, DC: Author.
East Germany
▶ Germany, Quality of Life
Easterlin Paradox
Conal Smith
OECD, Paris, France
Synonyms
Hedonic treadmill
Definition
The Easterlin paradox is an empirical relation-
ship observed between measures of overall
▶ subjective well-being (such as ▶ life satisfac-
tion or ▶ happiness) and income first noted by
Richard Easterlin (1974). In Easterlin’s original
article, he observed that, although higher
incomes are associated with higher levels of
happiness within a country, average levels of
happiness for a country do not appear to increase
over time in line with increases in average
income. In other words, the rich are happier
than the poor, but there is no evidence that coun-
tries increase in average happiness as they get
richer.
Easterlin Paradox
Description
In the original formulation of the paradox,
Easterlin’s analysis was largely limited to one
country (the USA) with only limited data
available on other countries. Since then, better
information has indicated a strong empirical rela-
tionship across countries, with wealthy countries
having a higher average level of happiness. In fact,
there is a strong empirical relationship between the
logarithm of per capita Gross Domestic Product
(GDP) and average happiness across countries.
However, apart from this finding, there has been
relatively little data since 1974 to substantively
amend Easterlin’s original observation (Easterlin,
1995). Indeed, one of the most striking features of
the Easterlin paradox has been its robustness in the
face of nearly four decades of accumulating data.
The Easterlin paradox is significant because it
potentially calls into question one of the core
assumptions of economics as a discipline: that
increasing income (and hence consumption
possibilities) increases well-being. At a policy
level, if increasing the average level of income
in society does not increase the well-being of that
society, then the relevance of economic growth as
a policy goal is called into question.
Because the Easterlin paradox is so coun-
terintuitive when compared to the assumptions
underpinning traditional economic analysis, it
has been the focus of extensive analysis. Expla-
nations accounting for the Easterlin paradox
remain one of the main topics of research in the
economics of happiness, and a range of different
hypotheses have been put forward. Broadly
speaking, however, there are four main theories
accounting for the Easterlin paradox, not all of
which are mutually exclusive. The four theories
relate to social comparisons and ▶ adaptation,
offsetting effects, ▶ measurement error, and
whether there is an Easterlin paradox at all.
The most prominent account of the Easterlin
paradox places its main emphasis on social
comparisons and the role of adaptation to one’s
current circumstances. Clarke, Frijters, and
Shields (2008), for example, argue that the
Easterlin paradox can be explained if it is
a person’s relative income compared to some
1755 E
other reference group that determines their level of
happiness rather than the absolute income. In other
words, the rich are happier than the poor because
they have a higher level of income than other people
to which they compare themselves, not because of
the absolute level of consumption which they are
able to sustain with their higher income. For a given
individual, increasing their income will move them
up in the income distribution compared to their
peers and therefore increase happiness. However,
E
a general rise in income for all members of society
will leave average happiness unchanged since there
has been no change in the ranking of people in the
income distribution.
A related concept is the notion of adaptation.
Some studies have suggested that people adapt to
changes in their circumstances. An increase in
income may initially raise happiness, but as
a person adapts to the new level of income, their
happiness will return to its normal level. This is
sometimes referred to as the “hedonic treadmill.”
Adaptation does not explain why the rich in any
given society are happier than those with lower
incomes but does account for why a rise in
incomes over time does not lead to a general
rise in the average level of happiness in society.
A second group of explanations for the Easterlin
paradox focuses on the effect of factors other than
income on levels of happiness. It may be that while
higher incomes do lead to higher levels of happi-
ness, we do not observe a rise in average levels of
happiness as GDP increases because some other
factor important to happiness is moving in an off-
setting direction. Angeles (2011) finds that for the
USA, the impact of the fall in the proportion of the
population who are married between the 1970s
and the 2000s is, on its own, large enough to offset
the impact of higher levels of average income on
the expected level of happiness in the USA. Di
Tella and MacCulloch (2008) examined a similar
hypothesis with respect to Europe but found the
opposite result. The net effect of adding in addi-
tional variables known to have an effect on
happiness was to increase the expected level of
happiness compared to the actual change.
Easterlin et al. (2012) proposes a variant of
this hypothesis to account for changes in the level
of life satisfaction in China between 1990 and
E 1756
2010. During this period, per capita GDP in
China quadrupled, while life satisfaction fell at
first and then began to rise, although still not
returning to its 1990 levels by 2010. This pattern
is consistent with a weak positive effect of real
income on life satisfaction that has been offset by
a large initial fall in life satisfaction due to
a pronounced rise in ▶ unemployment, growing
▶ inequality, and an accompanying dissolution in
the social safety net associated with rapid eco-
nomic change. A similar pattern is seen in many
East European transition economies.
The third type of explanation for the Easterlin
paradox focuses on the measurement issues asso-
ciated with subjective well-being. The main data
sets for which long time series on subjective well-
being are available (e.g., Eurobarometer) are
based on relatively small sample sizes, and there
is therefore a relatively large degree of noise
associated with measured levels of subjective
well-being. There is general agreement that
the relationship between income and happiness
across countries declines as income increases
(i.e., each additional amount of income produces
less subjective well-being). Because most of the
countries for which time series information on
subjective well-being is available are relatively
wealthy, the effect of income growth may be too
small to be observed in existing data. In this case,
a stronger relationship between trends in income
and subjective well-being for developing nations
may become apparent as longer time series
become available for these countries.
A number of authors have noted other
measurement issues that may account for the
Easterlin paradox. While there is a robust empir-
ical relationship between life satisfaction and
GDP per capita across countries, this relationship
is much weaker for measures of happiness
(Diener, Kahneman, Tov & Arora, 2010;
Kahneman & Deaton, 2010). Both Easterlin’s
original 1974 article and much of the subsequent
literature used measures of happiness rather than
life satisfaction to examine the relationship
between income and subjective well-being. This
line of argument is developed further by Graham
(2011), who emphasizes the sensitivity of results
to the method of analysis used, the choice of
Easterlin Paradox
micro or macro data, and the way in which ques-
tions of subjective well-being are framed.
The final approach to the Easterlin paradox is to
argue that it does not in fact exist. Deaton (2007)
demonstrates a strong, linear relationship between
the logarithm of per capita GDP and life satisfaction.
Sacks, Stevenson, and Wolfers (2010) extend this to
compare the relationship between income and life
satisfaction at an aggregate level and at an individual
level. Showing that the relationship is largely the
same at both levels of analysis, it is argued that this
only makes sense if it is the absolute level of income
that drives life satisfaction, not the relative level.
Further, Sacks, Stevenson, and Wolfers provide
some examples of where life satisfaction has
moved in line with per capita GDP across
a number of countries.
Evidence on the reason for the Easterlin
paradox is currently unclear. Depending on the
data set, time frame considered, and methodology,
studies can be found supporting a range of differ-
ent positions. Given the centrality of the relation-
ship between income and well-being both to public
policy and to economics as a discipline, the
Easterlin paradox remains a significant area of
research within the economics of happiness.
Cross-References
▶ Consumption Externalities
▶ Happiness
▶ Life Satisfaction
▶ Subjective Well-being
References
Angeles, L. (2011). A closer look at the Easterlin Paradox.
The Journal of Socio-Economics, 40, 67–73.
Clark, A., Frijters, P., & Shields, M. (2008). Relative
Income, happiness, and Utility: An explanation for
the Easterlin Paradox and other puzzles. Journal of
Economic Literature, 46(1), 95–144.
Deaton, A. (2007). Income, ageing, health and wellbeing
around the world: Evidence from the gallup world poll
(NBER Working Paper 13317).
Di Tella, R., & MacCulloch, R. (2008). Gross national
happiness as an answer to the Easterlin Paradox?
Journal of Development Economics, 86, 22–42.
Eating Disorder(s) and Health-Related Quality of Life
Diener, E., Kahneman, D., Tov, W., & Arora, R. (2010).
Income’s association with judgments of life versus
feelings. In E. Diener, J. Helliwell, & D. Kahneman
(Eds.), International differences in well-being.
Oxford/New York: Oxford University Press.
Easterlin, R. (1974). Does economic growth improve the
human lot? In P. A. David & M. W. Reder (Eds.),
Nations and households in economic growth: Essays
in honour of Moses Abramovitz. New York: Academic.
Easterlin, R. (1995). Will raising the incomes of all
increase the happiness of all? Journal of Economic
Behaviour and Organization, 27(1), 35–47.
Easterlin, R., Morgan, R., Switek, M., & Wang, F. (2012).
China’s life satisfaction, 1990–2010. Proceedings of the
National Academy of Sciences, 109(25), 9775–9780.
Graham, C. (2011). Does more money make you happier?
Why so much debate? Applied Research in Quality of
Life, 6, 219–239.
Kahneman, D., & Deaton, A. (2010). High income
improves evaluation of life but not emotional
well-being. Proceedings of the National Academy of
Sciences, 107(38), 16489–16493.
Sacks, D., Stevenson, B., & Wolfers, J. (2010). Subjective
well-being, income, economic development and
growth (NBER working paper 16441).
Eat Local Campaigns
▶ Local Food Movements (100-Mile Diet)
Eating Attitudes Test (EAT-26)
▶ Caregivers of Patients with Eating Disorders,
Quality of Life
Eating Disorder(s) and Health-
Related Quality of Life
Janet D. Latner1, Mackenzie C. Kelly2 and
Jessica M. Murakami1
1
University of Hawaii, Honolulu, HI, USA
2
Department of Psychology, University of
Hawaii at Manoa, USA
Synonyms
Anorexia nervosa; Binge eating disorder;
Bulimia nervosa; Eating disturbances
1757 E
Definition
Psychological disorders characterized by abnor-
mal or disturbed eating habits.
Description
The eating disorders (EDs) are mental disorders
that can have a significant impact on both mental
E
and physical functioning. The major categories of
eating disorders include anorexia nervosa (AN),
bulimia nervosa (BN), and eating disorder not
otherwise specified (EDNOS). AN involves
refusal to maintain at least 85 % of expected
normal weight, intense fear of gaining weight,
shape and weight concerns, and amenorrhea.
BN involves recurrent episodes of binge eating,
consuming a large amount of food while losing
control over eating, compensatory behavior to
prevent weight gain (e.g., self-induced vomiting),
and shape and weight concerns. These disorders
affect predominantly women. EDNOS is defined
as any clinically significant eating disorder that
does not meet criteria for AN or BN. The most
widely studied category of EDNOS is binge eat-
ing disorder (BED), in which recurrent binge
eating episodes are not accompanied by compen-
satory behaviors. BED frequently co-occurs with
obesity, and patients often exhibit significant
shape and weight concerns as well.
Assessment of Health-Related Quality
of Life in EDs
The potential health implications associated with
AN, BN, and EDNOS are vast, ranging from
dental enamel erosion and acid reflux to osteopo-
rosis and kidney damage (e.g., Mehler, 2011). In
addition to the physical impacts, EDs are associ-
ated with impairment in psychological, social,
emotional, and cognitive functioning. Generic
▶ health-related quality of life (HRQOL) mea-
sures have been used to assess the level of impair-
ment associated with EDs. Generic measures
commonly used in ED research include the
▶ Medical Outcomes Studies 36-item (SF-36;
Ware & Sherbourne, 1992), 20-item (SF-20;
Stewart, Hays, & Ware, 1988), and 12-item