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What affects happiness: Absolute income, relative income or expected income?

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  • Tsui, Hsiao-Chien

Abstract

This study probes the reasons why increased income does not enhance happiness based on the effects of relative income and expected income. The study analysis is based on results from the Taiwan Social Change Survey from 1999 to 2002, using an ordered probit model. The findings demonstrate that the Taiwanese people are happier with an increase in absolute income. However, the marginal effect is reducing. In addition, relative income and expected income meet the expectation, indicating that people's happiness is not only related to absolute income, but also closely associated with the average income found in society and expected income.

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  • Tsui, Hsiao-Chien, 2014. "What affects happiness: Absolute income, relative income or expected income?," Journal of Policy Modeling, Elsevier, vol. 36(6), pages 994-1007.
    • Handle: RePEc:eee:jpolmo:v:36:y:2014:i:6:p:994-1007
    DOI: 10.1016/j.jpolmod.2014.09.005
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