Hedonic Adaptation to Living Standards and the Hidden Cost of Parental Income
AbstractHigh 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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Bibliographic InfoPaper provided by University of Zurich, Socioeconomic Institute in its series Working Papers with number 0713.
Length: 18 pages
Date of creation: Oct 2007
Date of revision:
Welfare; happiness; income norm; subjective well-being;
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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