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Negative emotions, income, and welfare: Causal estimates from the PSID

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  • Clingingsmith, David

Abstract

I use instrumental variables to estimate the causal effect of family income on the frequency with which individuals experience negative emotions. Doubling income reduces the experience of negative emotions by 0.26 SD on average. Percentage changes in income have a constant effect on negative emotion for family incomes below $80,000. Above $80,000, the effect of percentage changes declines, reaching zero at $200,000. A dollar change in family income has an eight times larger effect at the 20th percentile of income than the 80th percentile. Effects of income are similar on the high levels of negative emotion characteristic of mental illness, except there is no satiation.

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  • Clingingsmith, David, 2016. "Negative emotions, income, and welfare: Causal estimates from the PSID," Journal of Economic Behavior & Organization, Elsevier, vol. 130(C), pages 1-19.
  • Handle: RePEc:eee:jeborg:v:130:y:2016:i:c:p:1-19
    DOI: 10.1016/j.jebo.2016.07.004
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    Cited by:

    1. Bilson, Jessica R. & Jetter, Michael & Kristoffersen, Ingebjørg, 2017. "Gender Differences in the Link between Income and Trust Levels: Evidence from Longitudinal Data," IZA Discussion Papers 10585, Institute for the Study of Labor (IZA).

    More about this item

    Keywords

    Income; Emotion; Affect; Well-being; Welfare; Mental illness;

    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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