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The Connexion between Old and New Approaches to Financial Satisfaction

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  • Bernard M.S. Van Praag

    ()
    (University of Amsterdam, Economics Dept./SCHOLAR)

Abstract

In this paper we compare the new satisfaction evaluation approach, developed inthe nineties by Oswald ,Clark , Blanchflower and others with the older incomeevaluation (IEQ) approach, developed by Van Praag and Kapteyn in theseventies of the previous century. We find that both approaches yield strikinglysimilar results with respect to financial satisfaction. The IEQ-approach yieldsadditional insights, but it is not well applicable to other life domains thanfinance. It is argued that the usual Probit specification implies a specificcardinalization and, consequently, is less ordinal than usually thought. It isshown that the Probit-approach may be replaced by three other equivalentspecifications that have some computational and intuitive advantages. Published in: Luigino Bruni and Pierluigi Porta (eds.), 'Economics and Happiness. Framing the Analysis', Oxford University Press, 2005.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 04-053/3.

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Date of creation: 07 May 2004
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Handle: RePEc:dgr:uvatin:20040053

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Web page: http://www.tinbergen.nl

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Keywords: Financial satisfaction; income evaluation; Probit-models; cardinal utility;

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References

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  1. Ada Ferrer-i-Carbonell & Bernard Van Praag, 2001. "Poverty in Russia," Journal of Happiness Studies, Springer, vol. 2(2), pages 147-172, June.
  2. van Praag, B. M. S. & Frijters, P. & Ferrer-i-Carbonell, A., 2003. "The anatomy of subjective well-being," Journal of Economic Behavior & Organization, Elsevier, vol. 51(1), pages 29-49, May.
  3. Seidl, Christian, 1994. "How sensible is the Leyden individual welfare function of income?," European Economic Review, Elsevier, vol. 38(8), pages 1633-1659, October.
  4. van Praag, Bernard M. S., 1991. "Ordinal and cardinal utility : An integration of the two dimensions of the welfare concept," Journal of Econometrics, Elsevier, vol. 50(1-2), pages 69-89, October.
  5. Goedhart, T. & Halberstadt, V. & Praag, B.M.S. van & Kapteyn, A.J., 1977. "The poverty line: Concept and measurement," Open Access publications from Tilburg University urn:nbn:nl:ui:12-361898, Tilburg University.
  6. Ada Ferrer-i-Carbonell & Bernard M.S. van Praag, 2002. "The Subjective Costs of Health Losses due to Chronic Diseases," Tinbergen Institute Discussion Papers 02-023/3, Tinbergen Institute.
  7. Van Praag, Bernard M. S. & Kapteyn, Arie, 1973. "Further evidence on the individual welfare function of income: An empirical investigatiion in The Netherlands," European Economic Review, Elsevier, vol. 4(1), pages 33-62, April.
  8. Easterlin, Richard A, 2001. "Income and Happiness: Towards an Unified Theory," Economic Journal, Royal Economic Society, vol. 111(473), pages 465-84, July.
  9. Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, vol. 104(424), pages 648-59, May.
  10. 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.
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Cited by:
  1. Jens Bonke & Mette Deding & Mette Lausten, 2009. "Time and Money," Journal of Happiness Studies, Springer, vol. 10(2), pages 113-131, April.
  2. Clark, Andrew & Knabe, Andreas & Rätzel, Steffen, 2010. "Boon or bane? Others' unemployment, well-being and job insecurity," Labour Economics, Elsevier, vol. 17(1), pages 52-61, January.
  3. Cojocaru, Alexandru & Diagne, Mame Fatou, 2013. "How reliable and consistent are subjective measures of welfare in Europe and Central Asia ? evidence from the second life in transition survey," Policy Research Working Paper Series 6359, The World Bank.
  4. J. Bonke & M. Deding & M. Lausten, 2006. "Time and Money: Substitutes in Real Terms and Complements in Satisfactions," Economics Working Paper Archive wp_451, Levy Economics Institute.
  5. Andrew Clark & Andreas Knabe & Steffen Rätzel, 2009. "Unemployment as a Social Norm in Germany," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 129(2), pages 251-260.

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