Impact of income on life satisfaction in India: a generalised ordered probit model approach

The present study examines the impact of Net state domestic product (NSDP), absolute income, relative income, and income inequality on the life satisfaction of the people in India. The current study identified that an asymmetric income effect in the Indian context, i.e., an increase in income has a positive impact on those who currently reported lower levels of satisfaction. However, the relationship between an increase in income and life satisfaction is weak for those who currently reported higher levels of satisfaction. The results of the study support the existence of the Easterlin paradox in the context of India. Furthermore, the results emphasise the relative importance of absolute income compared to relative income. Although both factors hold significance, their combined impact on life satisfaction is not markedly stronger. The relationship between life satisfaction and income inequality is not identical as we move from a lower level to a higher level of life satisfaction.