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Subjective Well-Being, Income and Relative Concerns in the UK

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  • Roberta Distante

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Abstract

We present an empirical model aimed at testing the relative income hypothesis and the effect of deprivation relative to mean income on subjective well-being. The main concern is to deal with subjective panel data in an ordered response model where error homoskedasticity is not assumed. A heteroskedastic pooled panel ordered probit model with unobserved individual-specific effects is applied to micro-data available in the British Household Panel Survey for 1996–2007. In this framework, absolute income impacts negatively on both completely satisfied and dissatisfied individuals, while relative income affects positively the most satisfied ones. Such an effect is asymmetric, impacting more severely on the relatively poor in the reference group. We argue that our results buttress the validity of the relative income hypothesis as an explanation of the happiness paradox. Copyright Springer Science+Business Media B.V. 2013

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Bibliographic Info

Article provided by Springer in its journal Social Indicators Research.

Volume (Year): 113 (2013)
Issue (Month): 1 (August)
Pages: 81-105

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Handle: RePEc:spr:soinre:v:113:y:2013:i:1:p:81-105

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Web page: http://www.springer.com/economics/journal/11135

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Keywords: Subjective well-being; Relative income; Absolute income; Deprivation; Panel data; Discrete choice models;

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Cited by:
  1. Litchfield, Julie & Reilly, Barry & Veneziani, Mario, 2012. "An analysis of life satisfaction in Albania: An heteroscedastic ordered probit model approach," Journal of Economic Behavior & Organization, Elsevier, vol. 81(3), pages 731-741.

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