The Connexion between Old and New Approaches to Financial Satisfaction
In this paper we compare the new satisfaction evaluation approach, developed in the nineties by Oswald, Clark, Blanchflower and others with the older income evaluation (IEQ) approach, developed by Van Praag and Kapteyn in the seventies of the previous century. We find that both approaches yield strikingly similar results with respect to financial satisfaction. The IEQ- approach yields additional insights, but it is not well applicable to other life domains than finance. It is argued that the usual Probit specification implies a specific cardinalization and, consequently, is less ordinal than usually thought. It is shown that the Probit-approach may be replaced by three other equivalent specifications that have some computational and intuitive advantages.
|Date of creation:||May 2004|
|Publication status:||published in: Luigino Bruni and Pierluigi Porta (eds.), Economics and Happiness. Framing the Analysis, Oxford University Press, 2005|
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- Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, vol. 104(424), pages 648-659, May.
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- Ada Ferrer-i-Carbonell & Bernard M. S. van Praag, 2001. "The Subjective Costs of Health Losses Due to Chronic Diseases: An Alternative Model for Monetary Appraisal," Discussion Papers of DIW Berlin 262, DIW Berlin, German Institute for Economic Research.
- Van Praag, Bernard, 1971. "The welfare function of income in Belgium: An empirical investigation," European Economic Review, Elsevier, vol. 11(3), pages 337-369.
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- Easterlin, Richard A, 2001. "Income and Happiness: Towards an Unified Theory," Economic Journal, Royal Economic Society, vol. 111(473), pages 465-484, July.
- van Praag, Bernard M. S., 1991. "Ordinal and cardinal utility : An integration of the two dimensions of the welfare concept," Journal of Econometrics, Elsevier, vol. 50(1-2), pages 69-89, October.
- Easterlin, Richard A., 1995. "Will raising the incomes of all increase the happiness of all?," Journal of Economic Behavior & Organization, Elsevier, vol. 27(1), pages 35-47, June.
- Van Praag, Bernard M. S. & Kapteyn, Arie, 1973. "Further evidence on the individual welfare function of income: An empirical investigatiion in The Netherlands," European Economic Review, Elsevier, vol. 4(1), pages 33-62, April.
- Ada Ferrer-i-Carbonell & Bernard Van Praag, 2001. "Poverty in Russia," Journal of Happiness Studies, Springer, vol. 2(2), pages 147-172, June.
- Seidl, Christian, 1994. "How sensible is the Leyden individual welfare function of income?," European Economic Review, Elsevier, vol. 38(8), pages 1633-1659, October.
- Theo Goedhart & Victor Halberstadt & Arie Kapteyn & Bernard van Praag, 1977. "The Poverty Line: Concept and Measurement," Journal of Human Resources, University of Wisconsin Press, vol. 12(4), pages 503-520. Full references (including those not matched with items on IDEAS)
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