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Income and Well-being

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Author Info
Ada Ferrer-i-Carbonell () (Faculty of Economics and Econometrics, SEO, Amsterdam Economics, University of Amsterdam)

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Abstract

This paper presents an empirical analysis of the importance of 'comparison income' for individual well-being or happiness. In other words, the influence of the income of a reference group on individual well-being is examined. The main novelty is that various hypotheses are tested: importance of own income, relevance of the income of the reference group and of the distance between own income and the income of the reference group, and asymmetry of comparisons, i.e. the comparison income effect differing between richer and poor individuals. The analysis uses a self-reported measure of satisfaction with life as a measure of individual well-being. The data come from a large German panel known as GSOEP. The study concludes that the income of the reference group is about as important as own income for individual happiness, that individuals are happier the larger their income is in comparison with the income of the reference group, and that for some populations this comparison effect is asymmetric.

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Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 02-019/3.

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Date of creation: 15 Feb 2002
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Handle: RePEc:dgr:uvatin:20020019

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Related research
Keywords: Comparison Income; Interdependence of Preferences; Reference Group; Relative Utility; Subjective Well-Being;

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Find related papers by JEL classification:
I31 - Health, Education, and Welfare - - Welfare and Poverty - - - General Welfare

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Cited by:
(explanations, 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.)

  1. Vendrik,Maarten & Hirata,Johannes, 2003. "Experienced versus Decision Utility of Income: Relative or Absolute Happiness," Research Memoranda 054, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization. [Downloadable!]
  2. Nattavudh Powdthavee, 2003. "Is the Structure of Happiness Equations the Same in Poor and Rich Countries? The Case of South Africa," Development and Comp Systems 0309003, EconWPA, revised 06 Nov 2003. [Downloadable!]
    Other versions:
  3. Eric Bonsang, 2006. "The relative impact of income and health on the subjective well-being across generations in Europe," CREPP Working Papers 0601, Centre de Recherche en Economie Publique et de la Population (CREPP) (Research Center on Public and Population Economics) HEC-Management School, University of Liège. [Downloadable!]
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