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The poor, the rich and the happy: Exploring the link between income and subjective well-being

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  • Mentzakis, Emmanouil
  • Moro, Mirko

Abstract

The relationship between income and subjective well-being (SWB) is investigated using eight waves of the British Household Panel Survey and an estimation strategy that allows us to relax some assumptions typically made in the literature. First, we use a random effects generalised ordered probit model to investigate whether income effects are heterogeneous across SWB categories, and, second, we discretise (absolute and relative) income variables to allow for the income effects to vary across income groups. We find that higher absolute income increases SWB but up to a certain level, while low income is significantly correlated with low scores in the SWB ladder. Our results are consistent with the Easterlin Paradox that has been reported in the literature. We find that high-income groups are less likely to belong in the highest SWB level, which could be partly explained by the fact that the relative income status (rather than the absolute one) is more important in determining (the highest level of) SWB.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics).

Volume (Year): 38 (2009)
Issue (Month): 1 (January)
Pages: 147-158

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Handle: RePEc:eee:soceco:v:38:y:2009:i:1:p:147-158

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Web page: http://www.elsevier.com/locate/inca/620175

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Keywords: Well-being Happiness Income Relative income Generalised models Heterogeneity;

References

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Citations

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Cited by:
  1. Susana Ferreira & Mirko Moro, 2010. "On the Use of Subjective Well-Being Data for Environmental Valuation," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 46(3), pages 249-273, July.
  2. Prinz, Aloys & Bünger, Björn, 2011. "The usefulness of a Happy Income Index," CAWM Discussion Papers 15, Center of Applied Economic Research Münster (CAWM), University of Münster.
  3. Emmanouil Mentzakis & Paul McNamee & Mandy Ryan & Matthew Sutton, 2012. "Valuing Informal Care Experience: Does Choice of Measure Matter?," Social Indicators Research, Springer, vol. 108(1), pages 169-184, August.
  4. Helena Marques & Gabriel Pino & Juan de Dios Tena, 2013. "Do happiness indexes truly reveal happiness? : measurin happiness using revealed preferences from migration flows," Statistics and Econometrics Working Papers ws130908, Universidad Carlos III, Departamento de Estadística y Econometría.
  5. Liselot Hudders & Mario Pandelaere, 2012. "The Silver Lining of Materialism: The Impact of Luxury Consumption on Subjective Well-Being," Journal of Happiness Studies, Springer, vol. 13(3), pages 411-437, June.
  6. Grimani, Katerina, 2014. "Labor earnings and Psychological well-being: An Empirical Analysis," MPRA Paper 57098, University Library of Munich, Germany.
  7. Mentzakis, Emmanouil & Suhrcke, Marc & Roberts, Bayard & Murphy, Adrianna & McKee, Martin, 2013. "Estimating the causal effect of alcohol consumption on well-being for a cross-section of 9 former Soviet Union countries," Social Science & Medicine, Elsevier, vol. 89(C), pages 1-7.
  8. Pedersen, Peder J. & Schmidt, Torben Dall, 2009. "Happiness in Europe: Cross-Country Differences in the Determinants of Subjective Well-Being," IZA Discussion Papers 4538, Institute for the Study of Labor (IZA).
  9. Pedersen, Peder J. & Schmidt, Torben Dall, 2011. "Happiness in Europe," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(5), pages 480-489.
  10. Chang-Keun Han & Song-Iee Hong, 2011. "Assets and Life Satisfaction Patterns Among Korean Older Adults: Latent Class Analysis," Social Indicators Research, Springer, vol. 100(2), pages 225-240, January.

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