Estimating the Influence of Life Satisfaction and Positive Affect on Later Income Using Sibling Fixed-Effects
AbstractThe question of whether there is a connection between income and psychological well-being is a long-studied issue across the social, psychological, and behavioral sciences. Much research has found that richer people tend to be happier. However, relatively little attention has been paid to whether happier individuals perform better financially in the first place. This possibility of reverse causality is arguably understudied. Using data from a large US representative panel we show that adolescents and young adults who report higher life satisfaction or positive affect grow up to earn significantly higher levels of income later in life. We focus on earnings approximately one decade after the person's well-being is measured; we exploit the availability of sibling clusters to introduce family fixed-effects; we account for the human capacity to imagine later socio-economic outcomes and to anticipate the resulting feelings in current wellbeing. The study's results are robust to the inclusion of controls such as education, IQ, physical health, height, self-esteem, and later happiness. We consider how psychological well-being may influence income. Sobel-Goodman mediation tests reveal direct and indirect effects that carry the influence from happiness to income. Significant mediating pathways include a higher probability of obtaining a college degree, getting hired and promoted, having higher degrees of optimism and extraversion, and less neuroticism.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7033.
Length: 30 pages
Date of creation: Nov 2012
Date of revision:
Publication status: published in: Proceedings of the National Academy of Sciences, 2012, 109 (49), 19953-19958
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Other versions of this item:
- Jan-Emmanuel De Neve & Andrew J. Oswald, 2012. "Estimating the Influence of Life Satisfaction and Positive Affect on Later Income Using Sibling Fixed-Effects," CESifo Working Paper Series 4008, CESifo Group Munich.
- De Neve, Jan Emmanueal & Oswald, Andrew, 2012. "Estimating the influence of life satisfaction and positive affect on later income using sibling fixed-effects," CAGE Online Working Paper Series 99, Competitive Advantage in the Global Economy (CAGE).
- Jan-Emmanuel De Neve & Andrew J. Oswald, 2012. "Estimating the Influence of Life Satisfaction and Positive Affect on Later Income Using Sibling Fixed-Effects," CEP Discussion Papers dp1176, Centre for Economic Performance, LSE.
- I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
- I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-12-22 (All new papers)
- NEP-EVO-2012-12-22 (Evolutionary Economics)
- NEP-LTV-2012-12-22 (Unemployment, Inequality & Poverty)
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