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Heterogeneity in Reported Well-Being: Evidence from Twelve European Countries

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Author Info

  • Clark, Andrew E.

    ()
    (Paris School of Economics)

  • Etilé, Fabrice

    ()
    (INRA-CORELA)

  • Postel-Vinay, Fabien

    ()
    (University College London)

  • Senik, Claudia

    ()
    (Paris School of Economics)

  • Van der Straeten, Karine

    ()
    (CNRS, GATE)

Abstract

This paper models the relationship between income and reported well-being using latent class techniques applied to panel data from twelve European countries. Introducing both intercept and slope heterogeneity into this relationship, we strongly reject the hypothesis that individuals transform income into well-being in the same way. We show that both individual characteristics and country of residence are strong predictors of the four classes we identify. We expect that differences in the marginal effect of income on well-being across classes will be reflected in both behaviour and preferences for redistribution.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1339.

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Length: 29 pages
Date of creation: Oct 2004
Date of revision:
Publication status: published in: Economic Journal, 2005, 115 (502), C118-C132
Handle: RePEc:iza:izadps:dp1339

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Keywords: heterogeneity; well-being; utility; income; latent class;

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References

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  1. Lelkes, Orsolya, 2006. "Tasting freedom: Happiness, religion and economic transition," Journal of Economic Behavior & Organization, Elsevier, vol. 59(2), pages 173-194, February.
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  8. Stutzer, Alois & Frey, Bruno S., 2006. "Does marriage make people happy, or do happy people get married?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 35(2), pages 326-347, April.
  9. Deb, Partha & Trivedi, Pravin K., 2002. "The structure of demand for health care: latent class versus two-part models," Journal of Health Economics, Elsevier, vol. 21(4), pages 601-625, July.
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  12. DeSarbo, Wayne S. & Choi, Jungwhan, 1998. "A latent structure double hurdle regression model for exploring heterogeneity in consumer search patterns," Journal of Econometrics, Elsevier, vol. 89(1-2), pages 423-455, November.
  13. Easterlin, Richard A, 2001. "Income and Happiness: Towards an Unified Theory," Economic Journal, Royal Economic Society, vol. 111(473), pages 465-84, July.
  14. Winkelmann, Liliana & Winkelmann, Rainer, 1998. "Why Are the Unemployed So Unhappy? Evidence from Panel Data," Economica, London School of Economics and Political Science, vol. 65(257), pages 1-15, February.
  15. Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, vol. 104(424), pages 648-59, May.
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