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Evaluating the Link Between Perceived Income Adequacy and Financial Satisfaction: A Resource Deficit Hypothesis Approach

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  • John Grable
  • Sam Cupples

    ()

  • Fred Fernatt
  • NaRita Anderson
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    Abstract

    Data from an economically and racially diverse sample (N = 258) was used to determine (a) if an association between objectively measured income and perceived income adequacy exists, (b) how well individuals assess the adequacy of their income, and (c) if a bias exists, can these estimates be used to describe a person’s overall level of financial satisfaction? Duesenberry’s (Income, saving, and the theory of consumer behavior. Harvard University Press, Cambridge, 1949 ) relative income hypothesis and Kyrk’s (The family in the American economy. University of Chicago Press, Chicago, 1953 ) resource deficit hypothesis were adopted for use as the conceptual framework for this study. A positive but modest association between objective and perceived income adequacy was noted. It was also found that individuals do not do a particularly good job of accurately assessing their income adequacy. Finally, perceived income adequacy estimation bias was found to be associated with financial satisfaction. Those who perceived their income to be deficient were less satisfied financially. Policy and practitioner implications from the study are discussed as a means for improving financial satisfaction at the individual and household level. Copyright Springer Science+Business Media Dordrecht 2013

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    Bibliographic Info

    Article provided by Springer in its journal Social Indicators Research.

    Volume (Year): 114 (2013)
    Issue (Month): 3 (December)
    Pages: 1109-1124

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    Handle: RePEc:spr:soinre:v:114:y:2013:i:3:p:1109-1124

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

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    Related research

    Keywords: Perceived income adequacy; Financial satisfaction; Well-being;

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    1. Shane Sanders, 2010. "A Model of the Relative Income Hypothesis," The Journal of Economic Education, Taylor & Francis Journals, vol. 41(3), pages 292-305, June.
    2. Andrew E. Clark and Andrew J. Oswald, . "Satisfaction and Comparison Income," Economics Discussion Papers 419, University of Essex, Department of Economics.
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    7. Thomas Hansen & Britt Slagsvold & Torbjørn Moum, 2008. "Financial Satisfaction in Old Age: A Satisfaction Paradox or a Result of Accumulated Wealth?," Social Indicators Research, Springer, vol. 89(2), pages 323-347, November.
    8. Caporale, Guglielmo Maria & Georgellis, Yannis & Tsitsianis, Nicholas & Yin, Ya Ping, 2009. "Income and happiness across Europe: Do reference values matter?," Journal of Economic Psychology, Elsevier, vol. 30(1), pages 42-51, February.
    9. Easterlin, Richard A, 2001. "Income and Happiness: Towards an Unified Theory," Economic Journal, Royal Economic Society, vol. 111(473), pages 465-84, July.
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    11. Tania Burchardt, 2005. "Are One Man’s Rags Another Man’s Riches? Identifying Adaptive Expectations using Panel Data," Social Indicators Research, Springer, vol. 74(1), pages 57-102, October.
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