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Do reference values matter? Some notes and extensions on "income and happiness across Europe"

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  • Drichoutis, Andreas C.
  • Nayga Jr., Rodolfo M.
  • Lazaridis, Panagiotis

Abstract

We add to the analysis conducted in an article in this journal authored by Caporale, Georgellis, Tsitsianis, and Yin (2009) (hereafter CGTY) which assessed the relationship between subjective well-being, income and relative income in Europe. Specifically, we note some data management, model/variable specification, and econometric issues that can affect the validity of the findings of CGTY. We then present our own augmented model to test the robustness of the results from the CGTY study. When we try to replicate CGTY's estimation, we find that the main variable of interest, i.e. the reference income variable, reverts sign. We also find several differences in our results, the most important of which is that, in contrast to CGTY's result that suggests a statistically significant negative reference income effect on life satisfaction, reference income does not really significantly affect life satisfaction in our estimations.

Suggested Citation

  • Drichoutis, Andreas C. & Nayga Jr., Rodolfo M. & Lazaridis, Panagiotis, 2010. "Do reference values matter? Some notes and extensions on "income and happiness across Europe"," Journal of Economic Psychology, Elsevier, vol. 31(4), pages 479-486, August.
  • Handle: RePEc:eee:joepsy:v:31:y:2010:i:4:p:479-486
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    References listed on IDEAS

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    1. 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, vol. 46(1), pages 95-144, March.
    2. Greene,William H. & Hensher,David A., 2010. "Modeling Ordered Choices," Cambridge Books, Cambridge University Press, number 9780521194204, November.
    3. McBride, Michael, 2001. "Relative-income effects on subjective well-being in the cross-section," Journal of Economic Behavior & Organization, Elsevier, vol. 45(3), pages 251-278, July.
    4. Caporale, Guglielmo Maria & Georgellis, Yannis & Tsitsianis, Nicholas & Yin, Ya Ping, 2009. "Income and happiness across Europe: Do reference values matter?," Journal of Economic Psychology, Elsevier, vol. 30(1), pages 42-51, February.
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    Citations

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    Cited by:

    1. Felix FitzRoy & Michael Nolan & Max Steinhardt & David Ulph, 2014. "Testing the tunnel effect: comparison, age and happiness in UK and German panels," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-30, December.
    2. FitzRoy, Felix & Steinhardt, Max Friedrich & Nolan, Michael, 2011. "Age, life-satisfaction, and relative income," HWWI Research Papers 110, Hamburg Institute of International Economics (HWWI).
    3. Felix R. FitzRoy & Michael A. Nolan & Max F. Steinhardt & David Ulph, 2011. "So Far so Good: Age, Happiness, and Relative Income," SOEPpapers on Multidisciplinary Panel Data Research 415, DIW Berlin, The German Socio-Economic Panel (SOEP).
    4. FitzRoy, Felix & Nolan, Michael A. & Steinhardt, Max F., 2011. "Age, Life-Satisfaction, and Relative Income: Insights from the UK and Germany," IZA Discussion Papers 6045, Institute for the Study of Labor (IZA).
    5. Felix R., FitzRoy & Michael, Nolan & Max F., Steinhardt, 2013. "Age, Life-satisfaction, and Relative Income – Insights from the UK and Germany," SIRE Discussion Papers 2013-51, Scottish Institute for Research in Economics (SIRE).

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