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Income, relational goods and happiness

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  • Leonardo Becchetti
  • Giovanni Trovato
  • David Andres Londono Bedoya

Abstract

Our empirical analysis on the determinants of self-declared happiness on more than 100 000 individuals from representative samples in 82 world countries does not reject the hypothesis that the time spent for relationships has a significant and positive impact on happiness. This basic nexus helps to understand new unexplored paths in the so-called 'happiness-income paradox'. To illustrate them we show that personal income has two main effects on happiness. The first is a positive effect which depends on individual's ranking within domestic income quintiles. The second is determined by the relationship between income and relational goods. In principle, more productive individuals may substitute (if the income effect prevails over the substitution effect) worked hours with the nonworking time made free for enjoying relationships, when they have strong preferences for them. The problem is that these individuals tend to have ties with their income class peers who share with them a high opportunity cost for the time spent for relationships. Hence, a coordination failure may reduce the joint investment in relational goods (local public goods which need to be co-produced in order to be enjoyed together) and, through this effect, individuals in the highest income quintiles may end up with poorer relational goods. The indirect impact of personal income on happiness through this channel is therefore expected to be negative.

Suggested Citation

  • Leonardo Becchetti & Giovanni Trovato & David Andres Londono Bedoya, 2011. "Income, relational goods and happiness," Applied Economics, Taylor & Francis Journals, vol. 43(3), pages 273-290.
  • Handle: RePEc:taf:applec:v:43:y:2011:i:3:p:273-290
    DOI: 10.1080/00036840802570439
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    1. repec:eee:ecolec:v:141:y:2017:i:c:p:66-75 is not listed on IDEAS
    2. Damiano Fiorillo & Nunzia Nappo, 2017. "Formal volunteering and self-perceived health. Causal evidence from the UK-SILC," Review of Social Economy, Taylor & Francis Journals, vol. 75(2), pages 112-138, April.
    3. David R. Just & Andrew S. Hanks, 2015. "The Hidden Cost of Regulation: Emotional Responses to Command and Control," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 97(5), pages 1385-1399.
    4. Francesco Contò & Mariantonietta Fiore & Piermichele La Sala, 2012. "Quality of Life And Human Isolation: The Case of Rural Area of Puglia," Romanian Journal of Regional Science, Romanian Regional Science Association, vol. 6(2), pages 31-52, DECEMBER.
    5. Piekalkiewicz, Marcin, 2016. "Money, Social Capital and Materialism. Evidence from Happiness Data," EconStor Preprints 130185, ZBW - German National Library of Economics.
    6. Paul Downward & Peter Dawson, 2016. "Is it Pleasure or Health from Leisure that We Benefit from Most? An Analysis of Well-Being Alternatives and Implications for Policy," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 126(1), pages 443-465, March.
    7. Paul, Satya & Guilbert, Daniel, 2013. "Income–happiness paradox in Australia: Testing the theories of adaptation and social comparison," Economic Modelling, Elsevier, vol. 30(C), pages 900-910.
    8. Antoci Angelo & Sabatini Fabio & Sodini Mauro, 2009. "Will growth and technology destroy social interaction? The inverted U-shape hypothesis," wp.comunite 0057, Department of Communication, University of Teramo.
    9. Rotondi, Valentina & Stanca, Luca & Tomasuolo, Miriam, 2017. "Connecting alone: Smartphone use, quality of social interactions and well-being," Journal of Economic Psychology, Elsevier, vol. 63(C), pages 17-26.
    10. Benedetto Gui & Luca Stanca, 2010. "Happiness and relational goods: well-being and interpersonal relations in the economic sphere," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 57(2), pages 105-118, June.
    11. Damiano Fiorillo, 2011. "Volunteer work and domain satisfactions: evidence from Italy," International Journal of Social Economics, Emerald Group Publishing, vol. 39(1/2), pages 97-124, December.
    12. Benedetto Gui, 2013. "Relational goods," Chapters,in: Handbook on the Economics of Reciprocity and Social Enterprise, chapter 30, pages 295-305 Edward Elgar Publishing.
    13. Damiano Fiorillo & Nunzia Nappo, 2014. "Job satisfaction in Italy: individual characteristics and social relations," International Journal of Social Economics, Emerald Group Publishing, vol. 41(8), pages 683-704, August.
    14. Francesco Sarracino, 2012. "Money, Sociability and Happiness: Are Developed Countries Doomed to Social Erosion and Unhappiness?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 109(2), pages 135-188, November.
    15. Emilio, Colombo & Valentina, Rotondi & Luca, Stanca, 2016. "Macroeconomic Conditions and Well-being: Do Social Interactions Matter?," Working Papers 355, University of Milano-Bicocca, Department of Economics, revised 31 Dec 2016.
    16. Giorgio Tavano Blessi & Enzo Grossi & Pier Luigi Sacco & Giovanni Pieretti & Guido Ferilli, 2014. "Cultural Participation, Relational Goods and Individual Subjective Well-Being: Some Empirical Evidence," Review of Economics & Finance, Better Advances Press, Canada, vol. 4, pages 33-46, August.
    17. Raul Caruso, 2011. "Relational Goods at Work! Crime and Sport Participation in Italy: Evidence from Panel Data Regional Analysis over the Period 1997–2003," Chapters,in: Contemporary Issues in Sports Economics, chapter 3 Edward Elgar Publishing.
    18. Francesco Sarracino, 2014. "Richer in Money, Poorer in Relationships and Unhappy? Time Series Comparisons of Social Capital and Well-Being in Luxembourg," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 115(2), pages 561-622, January.
    19. repec:spr:soinre:v:135:y:2018:i:2:d:10.1007_s11205-016-1519-7 is not listed on IDEAS
    20. Mikucka, Malgorzata & Sarracino, Francesco, 2014. "Making economic growth and well-being compatible: the role of trust and income inequality," MPRA Paper 59695, University Library of Munich, Germany.
    21. Tufan Ekici & Selda Koydemir, 2014. "Social Capital, Government and Democracy Satisfaction, and Happiness in Turkey: A Comparison of Surveys in 1999 and 2008," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 118(3), pages 1031-1053, September.

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