Advanced Search
MyIDEAS: Login to save this paper or follow this series

Age, Life-Satisfaction, and Relative Income: Insights from the UK and Germany

Contents:

Author Info

  • FitzRoy, Felix

    ()
    (University of St. Andrews)

  • Nolan, Michael A.

    ()
    (University of Hull)

  • Steinhardt, Max

    ()
    (Helmut Schmidt University, Hamburg)

Abstract

We first confirm previous results with the German Socio-Economic Panel by Layard et al. (2010), and obtain strong negative effects of comparison income. However, when we split the sample by age, we find quite different results for reference income. The effects on life-satisfaction are positive and significant for those under 45, consistent with Hirschman's (1973) 'tunnel effect', and only negative (and larger than in the full sample) for those over 45, when relative deprivation dominates. Thus for young respondents, reference income's signalling role, indicating potential future prospects, can outweigh relative deprivation effects. Own-income effects are also larger for the older sample, and of greater magnitude than the comparison income effect. In East Germany the reference income effects are insignificant for all. With data from the British Household Panel Survey, we confirm standard results when encompassing all ages, but reference income loses significance in both age groups, and most surprisingly, even own income becomes insignificant for those over 45, while education has significant negative effects.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://ftp.iza.org/dp6045.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6045.

as in new window
Length: 27 pages
Date of creation: Oct 2011
Date of revision:
Handle: RePEc:iza:izadps:dp6045

Contact details of provider:
Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org

Order Information:
Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Email:

Related research

Keywords: reference groups; comparison income; subjective life-satisfaction; age; welfare;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. 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, American Economic Association, vol. 46(1), pages 95-144, March.
  2. Ferrer-i-Carbonell, Ada, 2005. "Income and well-being: an empirical analysis of the comparison income effect," Journal of Public Economics, Elsevier, Elsevier, vol. 89(5-6), pages 997-1019, June.
  3. Blanchflower, David G. & Oswald, Andrew J., 2008. "Is well-being U-shaped over the life cycle?," Social Science & Medicine, Elsevier, Elsevier, vol. 66(8), pages 1733-1749, April.
  4. Hirschman, Albert O & Rothschild, Michael, 1973. "The Changing Tolerance for Income Inequality in the Course of Economic Development; with a Mathematical Appendix," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 87(4), pages 544-66, November.
  5. Senik, Claudia, 2004. "When information dominates comparison: Learning from Russian subjective panel data," Journal of Public Economics, Elsevier, Elsevier, vol. 88(9-10), pages 2099-2123, August.
  6. Boyce, Christopher J. & Brown, Gordon D.A., 2008. "Income Rank and Upward Comparisons," The Warwick Economics Research Paper Series (TWERPS), University of Warwick, Department of Economics 883, University of Warwick, Department of Economics.
  7. Drichoutis, Andreas C. & Nayga Jr., Rodolfo M. & Lazaridis, Panagiotis, 2010. "Do reference values matter? Some notes and extensions on "income and happiness across Europe"," Journal of Economic Psychology, Elsevier, Elsevier, vol. 31(4), pages 479-486, August.
  8. Senik, Claudia, 2005. "Ambition and jealousy. Income Interactions in the "old" Europe versus The "New" Europe and the United States," CEPREMAP Working Papers (Docweb), CEPREMAP 0510, CEPREMAP.
  9. Clark, Andrew E. & Oswald, Andrew J., 1994. "Satisfaction and comparison income," CEPREMAP Working Papers (Couverture Orange) 9408, CEPREMAP.
  10. Hirschman, Albert O., 1973. "The changing tolerance for income inequality in the course of economic development," World Development, Elsevier, Elsevier, vol. 1(12), pages 29-36, December.
  11. Andrew E. Clark & Nicolai Kristensen & Niels Westergård-Nielsen, 2007. "Job satisfaction and co-worker wages: Status or signal?," PSE Working Papers halshs-00587878, HAL.
  12. Richard Layard & Guy Mayraz & Stephen Nickell, 2009. "Does Relative Income Matter? Are the Critics Right?," CEP Discussion Papers, Centre for Economic Performance, LSE dp0918, Centre for Economic Performance, LSE.
  13. Ada Ferrer-i-Carbonell & Paul Frijters, 2004. "How Important is Methodology for the estimates of the determinants of Happiness?," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 114(497), pages 641-659, 07.
Full references (including those not matched with items on IDEAS)

Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Inequality, happiness & age
    by chris dillow in Stumbling and Mumbling on 2011-11-28 15:11:40
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Felix FitzRoy & Michael Nolan & Max Steinhardt & David Ulph, 2013. "Testing the Tunnel Effect: Comparison, Age and Happiness in UK and German Panels," Discussion Paper Series, Department of Economics, Department of Economics, University of St. Andrews 201304, Department of Economics, University of St. Andrews.
  2. Grund, Christian & Martin, Johannes, 2012. "Monetary Reference Points of Managers: An Empirical Investigation of Status Quo Preferences and Social Comparisons," IZA Discussion Papers 7097, Institute for the Study of Labor (IZA).
  3. Akay, Alpaslan & Martinsson, Peter, 2012. "Positional Concerns through the Life Cycle: Evidence from Subjective Well-Being Data and Survey Experiments," IZA Discussion Papers 6342, Institute for the Study of Labor (IZA).

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp6045. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.