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Adaptation or Social Comparison? The effects of income on happiness

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  • Angeles, Luis

Abstract

Two mechanisms have attracted considerable attention from researchers studying the effects of income on happiness: adaptation and social comparison. In this paper we study both mechanisms using a panel of British households. Besides dealing with the UK case in detail, the paper contributes to the literature by considering the two mecha- nisms together and testing for them both separately and jointly. Our results strongly support the existence of adaptation effects but find only weak evidence in favour of social comparison.

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File URL: http://hdl.handle.net/10943/136
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Paper provided by Scottish Institute for Research in Economics (SIRE) in its series SIRE Discussion Papers with number 2010-03.

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Date of creation: 2010
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Handle: RePEc:edn:sirdps:136
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Keywords: Income and happiness; adaptation; social comparison; BHPS;

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  8. Luttmer, Erzo F. P., 2004. "Neighbors as Negatives: Relative Earnings and Well-Being," Working Paper Series rwp04-029, Harvard University, John F. Kennedy School of Government.
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  10. Ada Ferrer-i-Carbonell & Paul Frijters, 2002. "How important is Methodology for the Estimates of the Determinants of Happiness?," Tinbergen Institute Discussion Papers 02-024/3, Tinbergen Institute.
  11. KNIGHT, John & SONG, Lina & GUNATILAKA, Ramani, 2009. "Subjective well-being and its determinants in rural China," China Economic Review, Elsevier, vol. 20(4), pages 635-649, December.
  12. Carol Graham & Andrew Felton, 2006. "Inequality and happiness: Insights from Latin America," Journal of Economic Inequality, Springer, vol. 4(1), pages 107-122, April.
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  15. Oswald, Andrew J. & Powdthavee, Nattavudh, 2006. "Does Happiness Adapt? A Longitudinal Study of Disability with Implications for Economists and Judges," IZA Discussion Papers 2208, Institute for the Study of Labor (IZA).
  16. Oswald, Andrew J. & Powdthavee, Nattavudh, 2007. "Obesity, Unhappiness, and The Challenge of Affluence: Theory and Evidence," IZA Discussion Papers 2717, Institute for the Study of Labor (IZA).
  17. Clark, Andrew E., 1999. "Are wages habit-forming? evidence from micro data," Journal of Economic Behavior & Organization, Elsevier, vol. 39(2), pages 179-200, June.
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Cited by:

  1. Ehsan Latif, 2015. "Happiness Adaptation to Income: Evidence from Canada," Economics Bulletin, AccessEcon, vol. 35(3), pages 1477-1487.
  2. Luis Angeles, 2009. "Adaption and anticipation effects to life events in the United Kingdom," Working Papers 2009_08, Business School - Economics, University of Glasgow.
  3. Victoria Reyes-García & Ronnie Babigumira & Aili Pyhälä & Sven Wunder & Francisco Zorondo-Rodríguez & Arild Angelsen, 2016. "Subjective Wellbeing and Income: Empirical Patterns in the Rural Developing World," Journal of Happiness Studies, Springer, vol. 17(2), pages 773-791, April.

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