Advanced Search
MyIDEAS: Login to save this paper or follow this series

The Role of Income Aspirations in Individual Happiness

Contents:

Author Info

  • Alois Stutzer

Abstract

Does individual well-being depend on the absolute level of income and consumption or is it relative to one's aspirations? In a direct empirical test, it is found that higher income aspirations reduce people's utility, ceteris paribus. Individual data on reported satisfaction with life are used as a proxy measure for utility, and income evaluation measures are applied as proxies for people's aspiration levels. Consistent with processes of adaptation and social comparison, income aspirations increase with people's income as well as with the average income in the community they live in.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.iew.uzh.ch/wp/iewwp124.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Institute for Empirical Research in Economics - University of Zurich in its series IEW - Working Papers with number 124.

as in new window
Length:
Date of creation:
Date of revision:
Handle: RePEc:zur:iewwpx:124

Contact details of provider:
Postal: Blümlisalpstrasse 10, CH-8006 Zürich
Phone: +41-1-634 22 05
Fax: +41-1-634 49 07
Email:
Web page: http://www.econ.uzh.ch/
More information through EDIRC

Related research

Keywords: aspiration level; interdependent preferences; relative income; subjective well-being; utility;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Gary S. Becker, 1974. "A Theory of Social Interactions," NBER Working Papers 0042, National Bureau of Economic Research, Inc.
  2. Bruno S. Frey & Alois Stutzer, 2000. "Happiness, Economy and Institutions," CESifo Working Paper Series 246, CESifo Group Munich.
  3. Ferrer-i-Carbonell, Ada, 2005. "Income and well-being: an empirical analysis of the comparison income effect," Journal of Public Economics, Elsevier, Elsevier, vol. 89(5-6), pages 997-1019, June.
  4. Oswald, Andrew, 1997. "Happiness and Economic Performance," The Warwick Economics Research Paper Series (TWERPS) 478, University of Warwick, Department of Economics.
  5. Schwarze, Johannes & Härpfer, Marco, 2002. "Are People Inequality Averse, and Do They Prefer Redistribution by the State? Evidence From German Longitudinal Data on Life Satisfaction," IZA Discussion Papers 430, Institute for the Study of Labor (IZA).
  6. Hollander, Heinz, 2001. "On the validity of utility statements: standard theory versus Duesenberry's," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 45(3), pages 227-249, July.
  7. Neumark, David & Postlewaite, Andrew, 1998. "Relative income concerns and the rise in married women's employment," Journal of Public Economics, Elsevier, Elsevier, vol. 70(1), pages 157-183, October.
  8. Bernard M.S. van Praag & Paul Frijters, 1999. "The measurement of welfare and well-being; the Leyden approach," School of Economics and Finance Discussion Papers and Working Papers Series, School of Economics and Finance, Queensland University of Technology 071a, School of Economics and Finance, Queensland University of Technology.
  9. DiTella, Rafael & MacCulloch, Robert & Oswald, Andrew J., 2001. "Preferences over inflation and unemployment: Evidence from surveys of happiness," ZEI Working Papers B 03-2001, ZEI - Center for European Integration Studies, University of Bonn.
  10. Van Praag, Bernard, 1971. "The welfare function of income in Belgium: An empirical investigation," European Economic Review, Elsevier, Elsevier, vol. 11(3), pages 337-369.
  11. Frank, Robert H, 1985. "The Demand for Unobservable and Other Nonpositional Goods," American Economic Review, American Economic Association, American Economic Association, vol. 75(1), pages 101-16, March.
  12. Layard, Richard, 1980. "Human Satisfactions and Public Policy," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 90(363), pages 737-50, December.
  13. Alberto Alesina & Rafael Di Tella & Robert MacCulloch, 2001. "Inequality and Happiness: Are Europeans and Americans Different?," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 1938, Harvard - Institute of Economic Research.
  14. McBride, Michael, 2001. "Relative-income effects on subjective well-being in the cross-section," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 45(3), pages 251-278, July.
  15. Frank, Robert H, 1997. "The Frame of Reference as a Public Good," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 107(445), pages 1832-47, November.
  16. Christopher D. Carroll & Jody Overland & David N. Weil, 1995. "Saving and growth with habit formation," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 95-42, Board of Governors of the Federal Reserve System (U.S.).
  17. Kahneman, Daniel & Wakker, Peter P & Sarin, Rakesh, 1997. "Back to Bentham? Explorations of Experienced Utility," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 112(2), pages 375-405, May.
  18. Stadt, H. van de & Geer, S.A. van de & Kapteyn, A.J., 1985. "The relativity of utility: Evidence from panel data," Open Access publications from Tilburg University urn:nbn:nl:ui:12-364325, Tilburg University.
  19. Franco Modigliani, 1949. "Fluctuations in the Saving-Income Ratio: A Problem in Economic Forecasting," NBER Chapters, in: Studies in Income and Wealth, pages 369-444 National Bureau of Economic Research, Inc.
  20. Andrew E. Clark and Andrew J. Oswald, . "Satisfaction and Comparison Income," Economics Discussion Papers, University of Essex, Department of Economics 419, University of Essex, Department of Economics.
  21. Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 104(424), pages 648-59, May.
  22. Bruno S. Frey & Alois Stutzer, . "What can Economists Learn from Happiness Research?," IEW - Working Papers, Institute for Empirical Research in Economics - University of Zurich 080, Institute for Empirical Research in Economics - University of Zurich.
  23. Blanchflower, David G. & Oswald, Andrew J., 2004. "Well-being over time in Britain and the USA," Journal of Public Economics, Elsevier, Elsevier, vol. 88(7-8), pages 1359-1386, July.
  24. Easterlin, Richard A., 2001. "Life cycle welfare: evidence and conjecture," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, Elsevier, vol. 30(1), pages 31-61, January.
  25. Pollak, Robert A, 1970. "Habit Formation and Dynamic Demand Functions," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 78(4), pages 745-63, Part I Ju.
  26. Tomes, Nigel, 1986. "Income distribution, happiness and satisfaction: A direct test of the interdependent preferences model," Journal of Economic Psychology, Elsevier, Elsevier, vol. 7(4), pages 425-446, December.
  27. Ernst Fehr & Simon Gaechter, . "Fairness and Retaliation: The Economics of Reciprocitys," IEW - Working Papers, Institute for Empirical Research in Economics - University of Zurich 040, Institute for Empirical Research in Economics - University of Zurich.
  28. Clark, Andrew E. & Oswald, Andrew J., 1998. "Comparison-concave utility and following behaviour in social and economic settings," Journal of Public Economics, Elsevier, Elsevier, vol. 70(1), pages 133-155, October.
  29. Pollak, Robert A, 1976. "Interdependent Preferences," American Economic Review, American Economic Association, American Economic Association, vol. 66(3), pages 309-20, June.
  30. Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 334-38, May.
  31. Bernard M. S. van Praag & Nico L. van der Sar, 1988. "Household Cost Functions and Equivalence Scales," Journal of Human Resources, University of Wisconsin Press, vol. 23(2), pages 193-210.
  32. Easterlin, Richard A., 1995. "Will raising the incomes of all increase the happiness of all?," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 27(1), pages 35-47, June.
  33. Easterlin, Richard A, 2001. "Income and Happiness: Towards an Unified Theory," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 111(473), pages 465-84, July.
  34. Armin Falk & Markus Knell, . "Choosing the Joneses On the Endogeneity of Reference Groups," IEW - Working Papers, Institute for Empirical Research in Economics - University of Zurich 053, Institute for Empirical Research in Economics - University of Zurich.
  35. Boskin, Michael J & Sheshinski, Eytan, 1978. "Optimal Redistributive Taxation when Individual Welfare Depends upon Relative Income," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 92(4), pages 589-601, November.
Full references (including those not matched with items on IDEAS)

Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Dissociating from poverty
    by chris dillow in Stumbling and Mumbling on 2011-05-06 13:12:43
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:zur:iewwpx:124. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marita Kieser).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.