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Economic satisfaction and income rank in small neighbourhoods

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Author Info
Andrew E. Clark
Nicolai Kristensen
Niels Westergård-Nielsen

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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 9000 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, the individuals are rank-sensitive: conditional on own income and neighbourhood median income, individuals are more satisfied as their percentile neighbourhood ranking improves. A ten percentage point rise in rank (i.e. from 40 th to 20 th 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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Paper provided by PSE (Ecole normale supérieure) in its series PSE Working Papers with number 2008-44.

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Date of creation: 2008
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Handle: RePEc:pse:psecon:2008-44

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  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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  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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