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Income, happiness, and the disutility of labor

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  • Knabe, Andreas
  • Rätzel, Steffen

Abstract

We reexamine the claim that the effect of income on subjective well-being suffers from a systematic downward bias if one ignores that higher income is typically associated with more work effort. We analyze this claim using German panel data, controlling for individual unobserved heterogeneity, and specifying the impact of working hours in a non-monotonic form. Our results suggest that the impact of working hours on happiness is rather small and exhibits an inverse U-shape. We do not find evidence that leaving working hours out of the analysis leads to an underestimation of the income effect. --

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Bibliographic Info

Paper provided by Free University Berlin, School of Business & Economics in its series Discussion Papers with number 2009/12.

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Date of creation: 2009
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Handle: RePEc:zbw:fubsbe:200912

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Keywords: Happiness; life satisfaction; income; disutility of labor;

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  1. Booth, Alison L & van Ours, Jan C, 2007. "Job Satisfaction and Family Happiness: The Part-time Work Puzzle," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6471, C.E.P.R. Discussion Papers.
  2. Pouwels, Babette & Siegers, Jacques & Vlasblom, Jan Dirk, 2008. "Income, working hours, and happiness," Economics Letters, Elsevier, Elsevier, vol. 99(1), pages 72-74, April.
  3. Erzo F. P. Luttmer, 2005. "Neighbors as Negatives: Relative Earnings and Well-Being," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 120(3), pages 963-1002, August.
  4. 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, American Economic Association, vol. 46(1), pages 95-144, March.
  5. Ada Ferrer-i-Carbonell & Paul Frijters, 2002. "How important is Methodology for the Estimates of the Determinants of Happiness?," Tinbergen Institute Discussion Papers 02-024/3, Tinbergen Institute.
  6. repec:ese:iserwp:2007-20 is not listed on IDEAS
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Cited by:
  1. Homann, Malte & Jensen, Uwe, 2013. "Does better education cause higher income?," HWWI Research Papers 145, Hamburg Institute of International Economics (HWWI).

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