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Economic Satisfaction and Income Rank in Small Neighbourhoods

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Listed:
  • Clark, Andrew E.

    () (Paris School of Economics)

  • Kristensen, Nicolai

    (Department of Economics, Aarhus School of Business)

  • Westergaard-Nielsen, Niels

    () (Department of Economics, Aarhus School of Business)

Abstract

We contribute to the literature on well-being and comparisons by appealing to new Danish data dividing the country up into around 9,000 small neighbourhoods. Administrative data provides us with the income of every person in each of these neighbourhoods. This income information is matched to demographic and economic satisfaction variables from eight years of Danish ECHP data. Panel regression analysis shows that, conditional on own household income, respondents report higher satisfaction levels when their neighbours are richer. However, individuals are rank-sensitive: conditional on own income and neighbourhood median income, respondents are more satisfied as their percentile neighbourhood ranking improves. A ten percentage point rise in rank (i.e. from 40th to 20th position in a 200-household cell) is worth 0.11 on a one to six scale, which is a large marginal effect in satisfaction terms.

Suggested Citation

  • Clark, Andrew E. & Kristensen, Nicolai & Westergaard-Nielsen, Niels, 2008. "Economic Satisfaction and Income Rank in Small Neighbourhoods," Working Papers 08-25, University of Aarhus, Aarhus School of Business, Department of Economics.
  • Handle: RePEc:hhs:aareco:2008_025
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    References listed on IDEAS

    as
    1. Blanchflower, David G. & Oswald, Andrew J., 2004. "Well-being over time in Britain and the USA," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1359-1386, July.
    2. Kingdon, Geeta Gandhi & Knight, John, 2007. "Community, comparisons and subjective well-being in a divided society," Journal of Economic Behavior & Organization, Elsevier, vol. 64(1), pages 69-90, September.
    3. Anna Piil Damm & Marie Louise Schultz-Nielsen, 2008. "The Construction of Neighbourhoods and its Relevance for the Measurement of Social and Ethnic Segregation: Evidence from Denmark," CReAM Discussion Paper Series 0810, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
    4. Anne Bolster & Simon Burgess & Ron Johnston & Kelvyn Jones & Carol Propper & Rebecca Sarker, 2007. "Neighbourhoods, households and income dynamics: a semi-parametric investigation of neighbourhood effects," Journal of Economic Geography, Oxford University Press, vol. 7(1), pages 1-38, January.
    5. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2008. "Relative Income, Happiness, and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," Journal of Economic Literature, American Economic Association, vol. 46(1), pages 95-144, March.
    6. Brown, Gordon D. A. & Gardner, Jonathan & Oswald, Andrew J. & Qian, Jing, 2005. "Does Wage Rank Affect Employees' Wellbeing?," IZA Discussion Papers 1505, Institute for the Study of Labor (IZA).
    7. Andrew E. Clark & David Masclet & Marie Claire Villeval, 2005. "Effort and Comparison Income," Post-Print halshs-00176702, HAL.
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    More about this item

    Keywords

    Satisfaction; Neighbours; Income Comparisons; Geo-coded Data;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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