Advanced Search
MyIDEAS: Login

Money and Happiness: Evidence from the Industry Wage Structure

Contents:

Author Info

  • Jörn-Steffen Pischke

Abstract

There is a well-established positive correlation between life-satisfaction measures and income in individual level cross-sectional data. This paper attempts to provide some evidence on whether this correlation reflects causality running from money to happiness. I use industry wage differentials as instruments for income. This is based on the idea that at least part of these differentials is due to rents, and part of the pattern of industry affiliations of individuals is random. To probe the validity of these assumptions, I compare estimates for life satisfaction with those for job satisfaction, present fixed effects estimates, and present estimates for married women using their husbands' industry as the instrument. All these specifications paint a fairly uniform picture across three different data sets. IV estimates are similar to the OLS estimates suggesting that most of the association of income and well-being is causal.

Download Info

If 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.
File URL: http://cep.lse.ac.uk/pubs/download/dp1051.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp1051.

as in new window
Length:
Date of creation: May 2011
Date of revision:
Handle: RePEc:cep:cepdps:dp1051

Contact details of provider:
Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

Related research

Keywords: life satisfaction; well-being;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Betsey Stevenson & Justin Wolfers, 2008. "Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(1 (Spring), pages 1-102.
  2. Apouey, Bénédicte & Clark, Andrew E., 2010. "Winning Big but Feeling No Better? The Effect of Lottery Prizes on Physical and Mental Health," IZA Discussion Papers 4730, Institute for the Study of Labor (IZA).
  3. Easterlin, Richard A., 1995. "Will raising the incomes of all increase the happiness of all?," Journal of Economic Behavior & Organization, Elsevier, vol. 27(1), pages 35-47, June.
  4. Oswald, Andrew & Proto, Eugenio & Sgroi, Daniel, 2013. "Happiness and Productivity," CAGE Online Working Paper Series 107, Competitive Advantage in the Global Economy (CAGE).
  5. Simon Luechinger, 2009. "Valuing Air Quality Using the Life Satisfaction Approach," Economic Journal, Royal Economic Society, vol. 119(536), pages 482-515, 03.
  6. Oswald, Andrew J. & Powdthavee, Nattavudh, 2007. "Death, Happiness, and the Calculation of Compensatory Damages," IZA Discussion Papers 3159, Institute for the Study of Labor (IZA).
  7. Mayraz, Guy & Wagner, Gert G. & Schupp, Jürgen, 2009. "Life Satisfaction and Relative Income: Perceptions and Evidence," IZA Discussion Papers 4390, Institute for the Study of Labor (IZA).
  8. Clark, Andrew E. & Senik, Claudia, 2009. "Who Compares to Whom? The Anatomy of Income Comparisons in Europe," IZA Discussion Papers 4414, Institute for the Study of Labor (IZA).
  9. Gardner, Jonathan & Oswald, Andrew J., 2006. "Money and Mental Wellbeing: A Longitudinal Study of Medium-Sized Lottery Wins," IZA Discussion Papers 2233, Institute for the Study of Labor (IZA).
  10. Bruno S. Frey & Alois Stutzer, 2001. "What Can Economists Learn from Happiness Research?," CESifo Working Paper Series 503, CESifo Group Munich.
  11. Paul Frijters & John P. Haisken-DeNew & Michael A. Shields, 2004. "Money Does Matter! Evidence from Increasing Real Income and Life Satisfaction in East Germany Following Reunification," American Economic Review, American Economic Association, vol. 94(3), pages 730-740, June.
  12. Betsey Stevenson & Justin Wolfers, 2008. "Happiness Inequality in the United States," The Journal of Legal Studies, University of Chicago Press, vol. 37(S2), pages S33-S79, 06.
  13. Stock, James H & Wright, Jonathan H & Yogo, Motohiro, 2002. "A Survey of Weak Instruments and Weak Identification in Generalized Method of Moments," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(4), pages 518-29, October.
  14. Richard Layard & Guy Mayraz & Stephen Nickell, 2009. "Does Relative Income Matter? Are the Critics Right?," CEP Discussion Papers dp0918, Centre for Economic Performance, LSE.
  15. Richard Layard & Guy Mayraz & Stephen J. Nickell, 2007. "The Marginal Utility of Income," SOEPpapers on Multidisciplinary Panel Data Research 50, DIW Berlin, The German Socio-Economic Panel (SOEP).
  16. Erzo F. P. Luttmer, 2005. "Neighbors as Negatives: Relative Earnings and Well-Being," The Quarterly Journal of Economics, MIT Press, vol. 120(3), pages 963-1002, August.
  17. Robert Gibbons & Lawrence F. Katz, 1992. "Does Unmeasured Ability Explain Inter-Industry Wage Differentials?," NBER Working Papers 3182, National Bureau of Economic Research, Inc.
  18. Ackerberg, Daniel & Devereux, Paul J., 2008. "Improved JIVE Estimators for Overidentified Linear Models with and without Heteroskedasticity," CEPR Discussion Papers 6926, C.E.P.R. Discussion Papers.
  19. Holzer, Harry J & Katz, Lawrence F & Krueger, Alan B, 1991. "Job Queues and Wages," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 739-68, August.
  20. Oreopoulos, Philip, 2007. "Do dropouts drop out too soon? Wealth, health and happiness from compulsory schooling," Journal of Public Economics, Elsevier, vol. 91(11-12), pages 2213-2229, December.
  21. Arnaud Chevalier & Reamonn Lydon, 2002. "Estimates of the Effect of Wages on Job Satisfaction," CEP Discussion Papers dp0531, Centre for Economic Performance, LSE.
Full references (including those not matched with items on IDEAS)

Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Money and Happiness: Evidence from the Industry Wage Structure
    by maximorossi in NEP-LTV blog on 2011-06-06 10:30:15
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Robert J. B. Goudie & Sach Mukherjee & Jan-Emmanuel De Neve & Andrew J. Oswald & Stephen Wu, 2011. "Happiness as a Driver of Risk-Avoiding Behavior," CESifo Working Paper Series 3451, CESifo Group Munich.
  2. Berlin, Martin & Kaunitz, Niklas, 2011. "Subjective Well-Being, Income and Economic Margins," Working Paper Series 12/2011, Swedish Institute for Social Research.
  3. Alpaslan Akay & Olivier Bargain & Mathias Dolls & Dirk Neumann & Andreas Peichl & Sebastian Siegloch, 2012. "Happy Taxpayers? Income Taxation and Well-Being," SOEPpapers on Multidisciplinary Panel Data Research 526, DIW Berlin, The German Socio-Economic Panel (SOEP).

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:cep:cepdps:dp1051

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

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.