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Are Americans Really Less Happy With Their Incomes?

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  • Arie Kapteyn

    ()

  • James P. Smith

    ()

  • Arthur van Soest

    ()

Abstract

Recent economic research on international comparisons of subjective well-being suffers from several important biases due to the potential incomparability of response scales within and across countries. In this paper the authors concentrate on self-reported satisfaction with income in two countries: The Netherlands and the U.S. The comparability problem is addressed by using anchoring vignettes. They find that in the raw data, Americans appear decidedly less satisfied with their income than the Dutch. It turns out however that after response scale adjustment based on vignettes the distribution of satisfaction in the two countries is essentially identical. In addition, they find that the within-country cross-sectional effect of income on satisfaction- a key parameter in the recent debate in the economic literature- is significantly under-estimated especially in the US- when differences in response scales are not taken into account.

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Bibliographic Info

Paper provided by RAND Corporation Publications Department in its series Working Papers with number 858.

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Length: 38 pages
Date of creation: May 2011
Date of revision:
Handle: RePEc:ran:wpaper:858

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Keywords: happiness; life satisfaction; vignettes; reporting bias;

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References

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  1. Betsey Stevenson & Justin Wolfers, 2008. "Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox," CESifo Working Paper Series 2394, CESifo Group Munich.
  2. Bernard M. S. van Praag & P. Frijters & Ada Ferrer-i-Carbonell, 2001. "The Anatomy of Subjective Well-Being," Discussion Papers of DIW Berlin 265, DIW Berlin, German Institute for Economic Research.
  3. Teresa Bago d'Uva & Eddy Van Doorslaer & Maarten Lindeboom & Owen O'Donnell, 2008. "Does reporting heterogeneity bias the measurement of health disparities?," Health Economics, John Wiley & Sons, Ltd., vol. 17(3), pages 351-375.
  4. Arthur van Soest & Liam Delaney & Colm Harmon & Arie Kapteyn & James P. Smith, 2007. "Validating the Use of Vignettes for Subjective Threshold Scales," Working Papers 501, RAND Corporation Publications Department.
  5. Blanchflower, David G. & Oswald, Andrew J., 2001. "Well-Being Over Time in Britain and the USA," The Warwick Economics Research Paper Series (TWERPS) 616, University of Warwick, Department of Economics.
  6. 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.
  7. Charlier, E., 1997. "Equivalence Scales for the Former West Germany," Discussion Paper 1997-74, Tilburg University, Center for Economic Research.
  8. Nigel Rice & Silvana Robone & Peter Smith, 2009. "Analysis of the Validity of the Vignette Approach to Correct for Heterogeneity in Reporting Health System Responsiveness," Health, Econometrics and Data Group (HEDG) Working Papers 09/28, HEDG, c/o Department of Economics, University of York.
  9. Kristensen, Nicolai & Johansson, Edvard, 2008. "New evidence on cross-country differences in job satisfaction using anchoring vignettes," Labour Economics, Elsevier, vol. 15(1), pages 96-117, February.
  10. van de Stadt, Huib & Kapteyn, Arie & van de Geer, Sara, 1985. "The Relativity of Utility: Evidence from Panel Data," The Review of Economics and Statistics, MIT Press, vol. 67(2), pages 179-87, May.
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Cited by:
  1. Sauer, Carsten & Liebig, Stefan & Auspurg, Katrin & Hinz, Thomas & Donaubauer, Andy & Schupp, Jürgen, 2009. "A Factorial Survey on the Justice of Earnings within the SOEP-Pretest 2008," IZA Discussion Papers 4663, Institute for the Study of Labor (IZA).
  2. Arie Kapteyn & James P. Smith & Arthur Van Soest, 2009. "Life Satisfaction," Working Papers 623-1, RAND Corporation Publications Department.
  3. Christoph Wunder, 2008. "Adaptation to Income over Time: A Weak Point of Subjective Well-Being," SOEPpapers on Multidisciplinary Panel Data Research 130, DIW Berlin, The German Socio-Economic Panel (SOEP).

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