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Economic Satisfaction and Income Rank in Small Neighbourhoods

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Author Info
Clark, Andrew E. () (PSE)
Kristensen, Nicolai () (Aarhus School of Business)
Westergård-Nielsen, Niels () (Aarhus School of Business)

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Abstract

We contribute to the literature on well-being and comparisons by appealing to new Danish data dividing the country up into around 9,000 small neighbourhoods. Administrative data provides us with the income of every person in each of these neighbourhoods. This income information is matched to demographic and economic satisfaction variables from eight years of Danish ECHP data. Panel regression analysis shows that, conditional on own household income, respondents report higher satisfaction levels when their neighbours are richer. However, individuals are rank-sensitive: conditional on own income and neighbourhood median income, respondents are more satisfied as their percentile neighbourhood ranking improves. A ten percentage point rise in rank (i.e. from 40th to 20th position in a 200-household cell) is worth 0.11 on a one to six scale, which is a large marginal effect in satisfaction terms.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3813.

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Date of creation: Nov 2008
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Publication status: forthcoming in: Journal of the European Economic Association
Handle: RePEc:iza:izadps:dp3813

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Related research
Keywords: income comparisons; neighbours; satisfaction; geo-coded data;

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Find related papers by JEL classification:
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models
D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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References listed on IDEAS
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. David G. Blanchflower & Andrew J. Oswald, 2000. "Well-Being Over Time in Britain and the USA," NBER Working Papers 7487, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Anna Piil Damm & Marie Louise Schultz-Nielsen, 2008. "The Construction of Neighbourhoods and its Relevance for the Measurement of Social and Ethnic Segregation: Evidence from Denmark," CReAM Discussion Paper Series 0810, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London. [Downloadable!]
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  3. Kingdon, Geeta Gandhi & Knight, John, 2007. "Community, comparisons and subjective well-being in a divided society," Journal of Economic Behavior & Organization, Elsevier, vol. 64(1), pages 69-90, September. [Downloadable!] (restricted)
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  4. Anne Bolster & Simon Burgess & Ron Johnston & Kelvyn Jones & Carol Propper & Rebecca Sarker, 2004. "Neighbourhoods, Households and Income Dynamics: A Semi-Parametric Investigation of Neighbourhood Effects," The Centre for Market and Public Organisation 04/106, Department of Economics, University of Bristol, UK. [Downloadable!]
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  5. 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.
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  6. John F. Heliwell & Haifang Huang, 2005. "How's the Job? Well-Being and Social Capital in the Workplace," NBER Working Papers 11759, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Carol Graham & Andrew Felton, 2006. "Inequality and happiness: Insights from Latin America," Journal of Economic Inequality, Springer, vol. 4(1), pages 107-122, April. [Downloadable!] (restricted)
  8. Brown, Gordon D. A. & Gardner, Jonathan & Oswald, Andrew & Qian, Jing, 2005. "Does Wage Rank Affect Employees’ Wellbeing?," IZA Discussion Papers 1505, Institute for the Study of Labor (IZA). [Downloadable!]
  9. Erzo F. P. Luttmer, 2005. "Neighbors as Negatives: Relative Earnings and Well-Being," The Quarterly Journal of Economics, MIT Press, vol. 120(3), pages 963-1002, August.
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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. Andrew E. Clark, 2008. "Happiness, habits and high rank: Comparisons in economic and social life," PSE Working Papers 2008-61, PSE (Ecole normale supérieure). [Downloadable!]
  2. Nils Braakmann, 2009. "Other-Regarding Preferences, Spousal Disability and Happiness: Evidence from German Couples," SOEPpapers 194, DIW Berlin, The German Socio-Economic Panel (SOEP). [Downloadable!]
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