Income and Happiness: New Results from Generalized Threshold and Sequential Models
AbstractEmpirical studies on the relationship between income and happiness commonly use standard ordered response models, the most well-known representatives being the ordered logit and the ordered probit. However, these models restrict the marginal probability effects by design, and therefore limit the analysis of distributional aspects of a change in income, that is, the study of whether the income effect depend on a person’s happiness. In this paper we pinpoint the shortcomings of standard models and propose two alternatives, namely generalized threshold and sequential models. With data of two waves of the German Socio-Economic Panel, 1984 and 1997, we show that the more general models yield different marginal probability effects than standard models.
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Bibliographic InfoPaper provided by Socioeconomic Institute - University of Zurich in its series SOI - Working Papers with number 0407.
Length: 30 pages
Date of creation: Jun 2004
Date of revision:
Ordered response models; marginal effects; subjective well-being;
Other versions of this item:
- Boes, Stefan & Winkelmann, Rainer, 2004. "Income and Happiness: New Results from Generalized Threshold and Sequential Models," IZA Discussion Papers 1175, Institute for the Study of Labor (IZA).
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
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