A Dynamic Model of the Relationship Between Income and Financial Satisfaction: Evidence from Ireland
AbstractThe link between income and subjective satisfaction with one’s financial situation is explored in this paper using a panel analysis of 1,998 individuals tracked through the course of the boom period in Ireland, 1994-2001. A dynamic ordered probit model which incorporates state dependence and controls for correlated individual effects and the initial conditions problem is applied. The impact of the level of household income, the time-path of income and deviations of individual income from reference group income and household income are all considered. To the extent that income influences financial satisfaction, there is strong evidence from this paper that the level of household income has the most important effect but this effect is lessened once persistence in the data is controlled for and is diminishing at higher income levels. Controlling for income and socio-economic characteristics, the positive deviations of household income from reference group income are found to have a positive effect on financial satisfaction as are positive deviations of individual income from household income.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Economic and Social Studies in its journal Economic and Social Review.
Volume (Year): 39 (2008)
Issue (Month): 2 ()
Contact details of provider:
Web page: http://www.esr.ie
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Senik, Claudia, 2004. "When information dominates comparison: Learning from Russian subjective panel data," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 2099-2123, August.
- Andrew E. Clark and Andrew J. Oswald, .
"Satisfaction and Comparison Income,"
Economics Discussion Papers
419, University of Essex, Department of Economics.
- Easterlin, Richard A, 2001. "Income and Happiness: Towards an Unified Theory," Economic Journal, Royal Economic Society, vol. 111(473), pages 465-84, July.
- Vendrik, Maarten C.M. & Woltjer, Geert, 2006.
"Happiness and Loss Aversion: When Social Participation Dominates Comparison,"
IZA Discussion Papers
2218, Institute for the Study of Labor (IZA).
- Vendrik, Maarten & Woltjer, Geert, 2006. "Happiness and Loss Aversion: When Social Participation Dominates Comparision," Research Memorandum 027, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
- Paul Contoyannis & Andrew M. Jones & Nigel Rice, 2004. "The dynamics of health in the British Household Panel Survey," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(4), pages 473-503.
- David G. Blanchflower & Andrew J. Oswald, 2000.
"Well-Being Over Time in Britain and the USA,"
NBER Working Papers
7487, National Bureau of Economic Research, Inc.
- Blanchflower, David G. & Oswald, Andrew J., 2001. "Well-Being Over Time in Britain and the USA," The Warwick Economics Research Paper Series (TWERPS) 616, University of Warwick, Department of Economics.
- Winkelmann, Liliana & Winkelmann, Rainer, 1998. "Why Are the Unemployed So Unhappy? Evidence from Panel Data," Economica, London School of Economics and Political Science, vol. 65(257), pages 1-15, February.
- Bernard M. S. van Praag & P. Frijters & Ada Ferrer-i-Carbonell, 2001.
"The Anatomy of Subjective Well-Being,"
Discussion Papers of DIW Berlin
265, DIW Berlin, German Institute for Economic Research.
- Ferrer-i-Carbonell, Ada, 2005. "Income and well-being: an empirical analysis of the comparison income effect," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 997-1019, June.
- Ada Ferrer-i-Carbonell & Paul Frijters, 2004.
"How Important is Methodology for the estimates of the determinants of Happiness?,"
Royal Economic Society, vol. 114(497), pages 641-659, 07.
- Ada Ferrer-i-Carbonell & Paul Frijters, 2002. "How important is Methodology for the Estimates of the Determinants of Happiness?," Tinbergen Institute Discussion Papers 02-024/3, Tinbergen Institute.
- Matthew Rabin, 1998.
"Psychology and Economics,"
Journal of Economic Literature,
American Economic Association, vol. 36(1), pages 11-46, March.
- Rabin, Matthew, 1997. "Psychology and Economics," Department of Economics, Working Paper Series qt8jd5z5j2, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Matthew Rabin., 1997. "Psychology and Economics," Economics Working Papers 97-251, University of California at Berkeley.
- repec:att:wimass:9127 is not listed on IDEAS
- Kevin Denny & Orla Doyle, 2006. "Does Voting History Matter? Analysing Persistence in Turnout," Working Papers 200607, School Of Economics, University College Dublin.
- Verbeek, Marno & Nijman, Theo, 1992.
"Testing for Selectivity Bias in Panel Data Models,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(3), pages 681-703, August.
- Verbeek, M. & Nijman, T., 1990. "Testing For Selectivity Bias In Panel Data Models," Papers 9018, Tilburg - Center for Economic Research.
- Verbeek, M.J.C.M. & Nijman, T.E., 1990. "Testing for selectivity bias in panel data models," Discussion Paper 1990-18, Tilburg University, Center for Economic Research.
- Lowenstein, George & Prelec, Drazen, 1991. "Negative Time Preference," American Economic Review, American Economic Association, vol. 81(2), pages 347-52, May.
- Andrew M. Jones & Xander Koolman & Nigel Rice, 2006. "Health-related non-response in the British Household Panel Survey and European Community Household Panel: using inverse-probability-weighted estimators in non-linear models," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 169(3), pages 543-569.
- Andrew Clark, 2001.
"Unemployment As A Social Norm: Psychological Evidence from Panel Data,"
DELTA Working Papers
2001-17, DELTA (Ecole normale supérieure).
- Andrew E. Clark, 2003. "Unemployment as a Social Norm: Psychological Evidence from Panel Data," Journal of Labor Economics, University of Chicago Press, vol. 21(2), pages 289-322, April.
- McBride, Michael, 2001. "Relative-income effects on subjective well-being in the cross-section," Journal of Economic Behavior & Organization, Elsevier, vol. 45(3), pages 251-278, July.
- Stephen Pudney, 2008.
"The dynamics of perception: modelling subjective wellbeing in a short panel,"
Journal of the Royal Statistical Society Series A,
Royal Statistical Society, vol. 171(1), pages 21-40.
- Manski, Charles F, 1993.
"Identification of Endogenous Social Effects: The Reflection Problem,"
Review of Economic Studies,
Wiley Blackwell, vol. 60(3), pages 531-42, July.
- Frank, Robert H, 1997. "The Frame of Reference as a Public Good," Economic Journal, Royal Economic Society, vol. 107(445), pages 1832-47, November.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Links and Notes from April 17th Whitaker Institute Talk on Well-Being
by Liam Delaney in Economics and Psychology Research on 2013-05-03 19:32:00
- Beja Jr., Edsel, 2014. "Income growth and happiness: Reassessment of the Easterlin Paradox," MPRA Paper 53360, University Library of Munich, Germany.
- Wunder, Christoph, 2012. "Does subjective well-being dynamically adjust to circumstances?," Economics Letters, Elsevier, vol. 117(3), pages 750-752.
- FUSCO Alessio, 2013. "The dynamics of perceived financial difficulties," CEPS/INSTEAD Working Paper Series 2013-24, CEPS/INSTEAD.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Frank Walsh).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.