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Direct and indirect effects of happiness on wage: A simultaneous equations approach

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  • Mohanty, Madhu S.
  • Ullah, Aman

Abstract

Using data from the United Sates National Longitudinal Survey of Youth (NLSY79) and following a two-stage method, the current study estimates wage, schooling and happiness equations simultaneously and demonstrates that happiness affects the worker's wage not only directly, but also indirectly through its direct effect on years of schooling. The simultaneous relation between happiness and schooling demonstrated in this study further suggests that schooling also affects wage both directly and indirectly through happiness. The study supports the argument presented in several earlier studies that higher income does not necessarily guarantee higher levels of happiness.

Suggested Citation

  • Mohanty, Madhu S. & Ullah, Aman, 2012. "Direct and indirect effects of happiness on wage: A simultaneous equations approach," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 41(2), pages 143-152.
    • Handle: RePEc:eee:soceco:v:41:y:2012:i:2:p:143-152
    DOI: 10.1016/j.socec.2011.12.004
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    4. Nazgol Makki & Madhu S. Mohanty, 2019. "Mental Health and Happiness: Evidence From the U.S. Data," The American Economist, Sage Publications, vol. 64(2), pages 197-215, October.

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    More about this item

    Keywords

    Wage; Schooling; Happiness; Two-stage method;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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