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Does income deprivation affect people’s mental well-being?

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  • Maite Blázquez Cuesta

    (Universidad Autónoma de Madrid)

  • Santiago Budría

    (CEEAPLA, IZA and Banco de ESpaña)

Abstract

This paper uses panel data from the 2002-2010 waves of the German Socio-Economic Panel dataset (SOEP) to assess the impact of income deprivation upon individual mental well-being. Unobserved heterogeneity is controlled for by means of a random effects model extended to include a Mundlak term and explicit controls for the respondents’ personality traits. The paper shows that, for a given household income, a less favourable relative position in the income distribution is associated with lower mental well-being. This effect is not statistically significant among women, though. Among men, a one standard deviation increase in income deprivation is found to be as harmful as a reduction in permanent household income of almost 30%. Interestingly, this impact is found to differ among individuals endowed with different sets of non-cognitive skills. We suggest that policies, practices and initiatives aimed at improving well-being among European citizens require a better understanding of individuals’ sensitiveness to others’ income.

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File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/13/Fich/dt1312e.pdf
File Function: First version, October 2013
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Bibliographic Info

Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 1312.

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Length: 38 pages
Date of creation: Oct 2013
Date of revision:
Handle: RePEc:bde:wpaper:1312

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Keywords: mental health; random effects model; deprivation; personality traits;

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