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Income, Happiness, and the Disutility of Labour

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Author Info

  • Andreas Knabe

    ()
    (Faculty of Economics and Management, Freie University Berlin)

  • Steffen Rätzel

    ()
    (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)

Abstract

We reexamine the claim that the effect of income on subjective well-being suffers from a systematic downward bias if one ignores that higher income is typically associated with more work effort. We analyze this claim using German panel data, controlling for individual unobserved heterogeneity, and specifying the impact of working hours in a non-monotonic form. Our results suggest that the impact of working hours on happiness is rather small and exhibits an inverse U-shape. We do not find evidence that leaving working hours out of the analysis leads to an underestimation of the income effect.

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File URL: http://www.ww.uni-magdeburg.de/fwwdeka/femm/a2009_Dateien/2009_10.pdf
File Function: First version, 2009
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Bibliographic Info

Paper provided by Otto-von-Guericke University Magdeburg, Faculty of Economics and Management in its series FEMM Working Papers with number 09010.

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Length: 7 pages
Date of creation: Mar 2009
Date of revision:
Handle: RePEc:mag:wpaper:09010

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Keywords: Happiness; Life Satisfaction; Income; Working Hours;

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References

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  1. 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).
  2. Pouwels, Babette & Siegers, Jacques & Vlasblom, Jan Dirk, 2008. "Income, working hours, and happiness," Economics Letters, Elsevier, vol. 99(1), pages 72-74, April.
  3. Erzo F.P. Luttmer, 2004. "Neighbors as Negatives: Relative Earnings and Well-Being," NBER Working Papers 10667, National Bureau of Economic Research, Inc.
  4. repec:ese:iserwp:2007-20 is not listed on IDEAS
  5. Booth, Alison L. & van Ours, Jan C., 2007. "Job Satisfaction and Family Happiness: The Part-time Work Puzzle," IZA Discussion Papers 3020, Institute for the Study of Labor (IZA).
  6. Ada Ferrer-i-Carbonell & Paul Frijters, 2004. "How Important is Methodology for the estimates of the determinants of Happiness?," Economic Journal, Royal Economic Society, vol. 114(497), pages 641-659, 07.
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Cited by:
  1. Homann, Malte & Jensen, Uwe, 2013. "Does better education cause higher income?," HWWI Research Papers 145, Hamburg Institute of International Economics (HWWI).

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