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Are A mericans Really Less Happy with Their Incomes?

Author

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  • Arie Kapteyn
  • James P. Smith
  • Arthur Van Soest

Abstract

Recent economic research on international comparisons of subjective well-being suffers from several important biases due to the potential incomparability of response scales within and across countries. In this paper we concentrate on self-reported satisfaction with income in two countries: The Netherlands and the U.S. The comparability problem is addressed by using anchoring vignettes. We find that in the raw data, Americans appear decidedly less satisfied with their income than the Dutch. It turns out however that after response scale adjustment based on vignettes the distribution of satisfaction in the two countries is essentially identical. In addition, we find that the within-country cross-sectional effect of income on satisfaction- a key parameter in the recent debate in the economic literature- is significantly under-estimated especially in the US- when differences in response scales are not taken into account.
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Suggested Citation

  • Arie Kapteyn & James P. Smith & Arthur Van Soest, 2013. "Are A mericans Really Less Happy with Their Incomes?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 59(1), pages 44-65, March.
    • Handle: RePEc:bla:revinw:v:59:y:2013:i:1:p:44-65
    DOI: 10.1111/roiw.2013.59.issue-1
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    Cited by:

    1. Fontaine, Xavier & Haywood, Luke, 2018. "On the comparison of group inequalities using subjective data," Economics Letters, Elsevier, vol. 163(C), pages 17-21.
    2. Carol Graham, 2005. "The Economics of Happiness," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 6(3), pages 41-55, July.
    3. Knott, Rachel J. & Lorgelly, Paula K. & Black, Nicole & Hollingsworth, Bruce, 2017. "Differential item functioning in quality of life measurement: An analysis using anchoring vignettes," Social Science & Medicine, Elsevier, vol. 190(C), pages 247-255.
    4. Andrew M. Jones; Nigel Rice, Silvana Robone; & Nigel Rice; & Silvana Robone:, 2012. "A comparison of parametric and non-parametric adjustments using vignettes for self-reported data," Health, Econometrics and Data Group (HEDG) Working Papers 12/10, HEDG, c/o Department of Economics, University of York.
    5. Želinský, Tomáš & Ng, Jason Wei Jian & Mysíková, Martina, 2020. "Estimating subjective poverty lines with discrete information," Economics Letters, Elsevier, vol. 196(C).
    6. Fang Li & Danchen Liu & Ping Gao & Haiying Shao & Suyan Shen, 2024. "Analysing how government-provided vocational skills training affects migrant workers’ income: A study based on the Livelihood Capital Theory," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 11(1), pages 1-15, December.
    7. Niels Vermeer & Maarten Rooij & Daniel Vuuren, 2019. "Retirement Age Preferences: The Role of Social Interactions and Anchoring at the Statutory Retirement Age," De Economist, Springer, vol. 167(4), pages 307-345, December.
    8. Eric Bonsang & Arthur Soest, 2012. "Satisfaction with Job and Income Among Older Individuals Across European Countries," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 105(2), pages 227-254, January.
    9. O'Donnell, Gus & Oswald, Andrew J., 2015. "National well-being policy and a weighted approach to human feelings," Ecological Economics, Elsevier, vol. 120(C), pages 59-70.
    10. José-Ignacio Antón & Francisco-Javier Braña & Rafael Muñoz de Bustillo, 2016. "An analysis of the cost of disability across Europe using the standard of living approach," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 7(3), pages 281-306, August.
    11. William H. Greene & Mark N. Harris & Rachel J. Knott & Nigel Rice, 2021. "Specification and testing of hierarchical ordered response models with anchoring vignettes," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 184(1), pages 31-64, January.
    12. Christoph Wunder, 2008. "Adaptation to Income over Time: A Weak Point of Subjective Well-Being," SOEPpapers on Multidisciplinary Panel Data Research 130, DIW Berlin, The German Socio-Economic Panel (SOEP).
    13. Knott, R. & Lorgelly, P. & Black, N. & Hollingsworth, B., 2016. "Differential item functioning in the EQ-5D: An exploratory analysis using anchoring vignettes," Health, Econometrics and Data Group (HEDG) Working Papers 16/14, HEDG, c/o Department of Economics, University of York.
    14. Mark Fabian, 2022. "Scale Norming Undermines the Use of Life Satisfaction Scale Data for Welfare Analysis," Journal of Happiness Studies, Springer, vol. 23(4), pages 1509-1541, April.
    15. Berggren, Niclas & Nilsson, Therese & Bjørnskov, Christian, 2015. "What Aspects of Society Affect the Quality of Life of a Minority? Global Evidence from the New Gay Happiness Index," Working Paper Series 1101, Research Institute of Industrial Economics.
    16. Bert Van Landeghem, 2012. "Panel Conditioning and Self-Reported Satisfaction: Evidence from International Panel Data and Repeated Cross-Sections," SOEPpapers on Multidisciplinary Panel Data Research 484, DIW Berlin, The German Socio-Economic Panel (SOEP).
    17. Carsten Sauer & Katrin Auspurg & Thomas Hinz & Stefan Liebig & Jürgen Schupp, 2014. "Method Effects in Factorial Surveys: An Analysis of Respondents' Comments, Interviewers' Assessments, and Response Behavior," SOEPpapers on Multidisciplinary Panel Data Research 629, DIW Berlin, The German Socio-Economic Panel (SOEP).
    18. Kapteyn, Arie & Wah, Saw Htay, 2016. "Challenges to small and medium-size businesses in Myanmar: What are they and how do we know?," Journal of Asian Economics, Elsevier, vol. 47(C), pages 1-22.

    More about this item

    JEL classification:

    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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