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Testing the Tunnel Effect: Comparison, Age and Happiness in UK and German Panels

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  • Felix, FitzRoy
  • Michael, Nolan
  • Max, Steinhardt
  • David, Ulph

Abstract

In contrast to previous results combining all ages we find positive effects of comparison income on happiness for the under 45s, and negative effects for those over 45. In the BHPS these coefficients are several times the magnitude of own income effects. In GSOEP they cancel to give no effect of effect of comparison income on life satisfaction in the whole sample, when controlling for fixed effects, and time-in-panel, and with flexible, age-group dummies. The residual age-happiness relationship is hump-shaped in all three countries. Results are consistent with a simple life cycle model of relative income under uncertainty.

Suggested Citation

  • Felix, FitzRoy & Michael, Nolan & Max, Steinhardt & David, Ulph, 2013. "Testing the Tunnel Effect: Comparison, Age and Happiness in UK and German Panels," SIRE Discussion Papers 2013-29, Scottish Institute for Research in Economics (SIRE).
  • Handle: RePEc:edn:sirdps:464
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    Cited by:

    1. Goerke, Laszlo & Pannenberg, Markus, 2015. "Direct evidence for income comparisons and subjective well-being across reference groups," Economics Letters, Elsevier, vol. 137(C), pages 95-101.
    2. Melanie Borah & Andreas Knabe & Carina Kuhställer, 2016. "Reference Income Effects in the Determination of Equivalence Scales Using Income Satisfaction Data," CESifo Working Paper Series 6123, CESifo Group Munich.
    3. repec:spr:inrvec:v:64:y:2017:i:2:d:10.1007_s12232-017-0274-7 is not listed on IDEAS
    4. Brown, Sarah & Gray, Daniel, 2014. "Household Finances and Well-Being: An Empirical Analysis of Comparison Effects," IZA Discussion Papers 8530, Institute for the Study of Labor (IZA).
    5. repec:eee:jhecon:v:57:y:2018:i:c:p:263-276 is not listed on IDEAS
    6. AMENDOLA, Adalgiso & DELL'ANNO, Roberto & PARISI, Lavinia, 2015. "Happiness, Inequality and Relative Concerns in European Countries," CELPE Discussion Papers 136, CELPE - Centre of Labour Economics and Economic Policy, University of Salerno, Italy.
    7. Howley, P.; & Knight, S.;, 2018. "Taking pleasure from neighbours’ misfortune: Comparison effects, social norms and the well-being of the unemployed," Health, Econometrics and Data Group (HEDG) Working Papers 18/02, HEDG, c/o Department of Economics, University of York.
    8. Ifcher, John & Zarghamee, Homa & Graham, Carol Lee, 2016. "Local Neighbors as Positives, Regional Neighbors as Negatives: Competing Channels in the Relationship between Others' Income, Health, and Happiness," IZA Discussion Papers 9934, Institute for the Study of Labor (IZA).
    9. Brown, Sarah & Gray, Daniel, 2016. "Household finances and well-being in Australia: An empirical analysis of comparison effects," Journal of Economic Psychology, Elsevier, vol. 53(C), pages 17-36.
    10. Andrew E. Clark, 2017. "Happiness, income and poverty," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 64(2), pages 145-158, June.
    11. FitzRoy, Felix & Nolan, Michael A., 2017. "Education, Income and Happiness: Panel Evidence for the UK," IZA Discussion Papers 11185, Institute for the Study of Labor (IZA).

    More about this item

    Keywords

    subjective life-satisfaction; comparison income; reference groups; age; welfare;

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General

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