Financial Satisfaction from Intra-Household Perspectives

We address individuals’ financial satisfaction from the intra-household perspective. Our purpose is twofold. First, we want to contrast the hypothesis of relative income within the household. Does the income level of one individual relative to that of other members of the same household matter in his/her income satisfaction? Second, we want to test procedural utility hypothesis in that different sources of income may contribute differentially to individuals’ income satisfaction. In particular, we compare between labour earnings and non-labour income. These two hypotheses are relevant for policy-making regarding subsidies, taxation and active labour market programs. We use data for Spain and Denmark in the European Community Household Panel (ECHP). In general terms, and for both countries, our results seem to confirm both the procedural hypothesis and the relative income hypothesis. Labour income contributes more to individual financial satisfaction than non-labour income for both husbands and wives in both countries. However, the effect of own share of labour income relative to the spouse’s differs considerably between men and woman and between the two countries.