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Hedonic Adaptation to Living Standards and the Hidden Cost of Parental Income

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Author Info
Stefan Boes () (Socioeconomic Institute, University of Zurich)
Kevin Staub () (Socioeconomic Institute, University of Zurich)
Rainer Winkelmann () (Economics Division, Federal Research Institute WSL, Birmensdorf, Switzerland)

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Abstract

High parental income, while undeniably causing beneÞts for a child in terms of better access to education and more favorable labor market outcomes, may at the same time increase a childÕs income aspirations and thereby reduce Þnancial satisfaction, ceteris paribus. In this paper, we investigate the relationship between Þnancial satisfaction and parental income with data from the German Socio-Economic Panel. The results indicate that there is indeed a negative well-being externality of parental income, and that children appear to compare their actual income situation with the aspiration level acquired while growing up.

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File URL: http://www.soi.uzh.ch/research/wp/2007/wp0713.pdf
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Publisher Info
Paper provided by University of Zurich, Socioeconomic Institute in its series Working Papers with number 0713.

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Length: 18 pages
Date of creation: Oct 2007
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Handle: RePEc:soz:wpaper:0713

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Related research
Keywords: Welfare; happiness; income norm; subjective well-being;

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Find related papers by JEL classification:
D62 - Microeconomics - - Welfare Economics - - - Externalities
I31 - Health, Education, and Welfare - - Welfare and Poverty - - - General Welfare

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