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Abstract

The link between income and subjective satisfaction with one’s financial situation is explored in this paper using a panel analysis of 4,000 individuals tracked through the course of the ‘Celtic Tiger’ boom period, 1994-2001. The impact of the level of individual and household income, the time-path of income and the impact of reference group income on financial satisfaction are all considered. To the extent that income influences financial satisfaction, there is strong evidence from this paper that household income has a greater effect on financial satisfaction than individual income. There is also evidence that changes in income have an independent effect on financial satisfaction with the time derivative of income entering positively in the financial satisfaction equation. Thus, our paper gives further evidence to support the hypothesis that individuals process changes as well as absolute levels of income. While reference group income has a negative effect at the start of the period it has no effect at the end.

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File URL: http://www.tcd.ie/Economics/TEP/2006_papers/TEP11.pdf
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Bibliographic Info

Paper provided by Trinity College Dublin, Department of Economics in its series Trinity Economics Papers with number tep200611.

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Length: 14 pages
Date of creation: Jun 2006
Date of revision:
Handle: RePEc:tcd:tcduee:tep200611

Contact details of provider:
Postal: Trinity College, Dublin 2
Phone: (+ 353 1) 6081325
Fax: 6772503
Web page: http://www.tcd.ie/Economics/
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Find related papers by JEL classification:

• D60 - Microeconomics - - Welfare Economics - - - General
• I31 - Health, Education, and Welfare - - Welfare and Poverty - - - General Welfare

This paper has been announced in the following NEP Reports:

• NEP-ALL-2007-02-24 (All new papers)

References

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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.
   
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   • Ada Ferrer-i-Carbonell & Paul Frijters, 2004. "How Important is Methodology for the estimates of the determinants of Happiness?," Economic Journal, Royal Economic Society, vol. 114(497), pages 641-659, 07.
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    • Clark, Andrew E. & Oswald, Andrew J., 1994. "Satisfaction and comparison income," CEPREMAP Working Papers (Couverture Orange) 9408, CEPREMAP.
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11. Matthew Rabin, 1998. "Psychology and Economics," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 11-46, March.
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1. Bundle: Microeconomic Insights from Citibank Data
   by Martin Ryan in Geary Behaviour Centre on 2011-02-06 21:14:00

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