Do reference values matter? Some notes and extensions on "income and happiness across Europe"
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.
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- 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.
- Clark, Andrew E. & Frijters, Paul & Shields, Michael A., 2007. "Relative Income, Happiness and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," IZA Discussion Papers 2840, Institute for the Study of Labor (IZA).
- Guglielmo Maria Caporale & Yannis Georgellis & Nicholas Tsitsianis & Ya Ping Yin, 2007.
"Income and Happiness across Europe: Do Reference Values Matter?,"
CESifo Working Paper Series
2146, CESifo Group Munich.
- 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.
- 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.
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