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Adaption or social comparison? The effects of income on happiness

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  • Luis Angeles

Abstract

Two mechanisms have attracted considerable attention from researchers studying the effects of income on happiness: adaptation and social comparison. In most empirical studies these two mechanisms have been considered separately. This paper contributes to the literature by jointly testing for the presence of adaptation and social comparison using UK data. Our results show that the data supports both adaptation and social comparison when we test them separately, but that only adaptation survives when we test them jointly. The result has important consequences for public policy and for our understanding of human motivation.

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Bibliographic Info

Paper provided by Business School - Economics, University of Glasgow in its series Working Papers with number 2009_09.

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Date of creation: Nov 2008
Date of revision: Jun 2009
Handle: RePEc:gla:glaewp:2009_09

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  1. Oswald, Andrew J. & Powdthavee, Nattavudh, 2008. "Does happiness adapt? A longitudinal study of disability with implications for economists and judges," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1061-1077, June.
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  8. 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.
  9. McBride, Michael, 2001. "Relative-income effects on subjective well-being in the cross-section," Journal of Economic Behavior & Organization, Elsevier, vol. 45(3), pages 251-278, July.
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  11. Grund, Christian & Sliwka, Dirk, 2005. "Reference Dependent Preferences and the Impact of Wage Increases on Job Satisfaction: Theory and Evidence," IZA Discussion Papers 1879, Institute for the Study of Labor (IZA).
  12. Carol Graham & Andrew Felton, 2006. "Inequality and happiness: Insights from Latin America," Journal of Economic Inequality, Springer, vol. 4(1), pages 107-122, April.
  13. Di Tella, Rafael & Haisken-De New, John & MacCulloch, Robert, 2010. "Happiness adaptation to income and to status in an individual panel," Journal of Economic Behavior & Organization, Elsevier, vol. 76(3), pages 834-852, December.
  14. Clark, Andrew E. & Frijters, Paul & Shields, Michael A., 2007. "Relative Income, Happiness and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," IZA Discussion Papers 2840, Institute for the Study of Labor (IZA).
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  17. Nattavudh Powdthavee, 2004. "Testing for Utility Interdependence in Marriage: Evidence from Panel Data," Labor and Demography 0403037, EconWPA, revised 01 Apr 2004.
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Cited by:
  1. Angeles, Luis, 2010. "Adaptation and anticipation effects to life events in the United Kingdom," SIRE Discussion Papers 2010-01, Scottish Institute for Research in Economics (SIRE).

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