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Do Happier Britons Have More Income? First-Order Stochastic Dominance Relations

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  • Hammond, Peter J

    (University of Warwick)

  • Liberini, Federica

    (Zurich, Switzerland)

  • Proto, Eugenio

    (University of Warwick)

Abstract

Using British Household Panel Survey data, for subjects not reporting the highest permitted satisfaction level, we show that the conditional income distribution given a higher reported level of life satisfaction rst-order stochastically dominates the corresponding conditional distribution given any lower satisfaction level. Subjects reporting the highest satisfaction level, however, have an income distribution dominated by distributions for some less satis ed individuals. Interestingly, this \top anomaly" is undetectable by standard ordered probit analysis. An alternative binary probit model for reporting maximal satisfaction suggests a possible explanation: more educated subjects not only tend to have higher income, but are also less likely to report maximal satisfaction.

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Paper provided by Competitive Advantage in the Global Economy (CAGE) in its series CAGE Online Working Paper Series with number 166.

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Date of creation: 2013
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Handle: RePEc:cge:wacage:166

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  1. Oswald, A.J., 1997. "Happiness and Economic Performance," Papers 18, Centre for Economic Performance & Institute of Economics.
  2. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2008. "Relative Income, Happiness, and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," Journal of Economic Literature, American Economic Association, vol. 46(1), pages 95-144, March.
  3. Blanchflower, David G. & Oswald, Andrew J., 2004. "Well-being over time in Britain and the USA," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1359-1386, July.
  4. 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.
  5. Paul R. Milgrom, 1979. "Good Nevs and Bad News: Representation Theorems and Applications," Discussion Papers 407R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. Daniel J. Benjamin & Ori Heffetz & Miles S. Kimball & Alex Rees-Jones, 2012. "What Do You Think Would Make You Happier? What Do You Think You Would Choose?," American Economic Review, American Economic Association, vol. 102(5), pages 2083-2110, August.
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