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

  • FitzRoy, Felix


    (University of St. Andrews)

  • Nolan, Michael A.


    (University of Hull)

  • Steinhardt, Max F.


    (Helmut Schmidt University, Hamburg)

  • Ulph, David


    (University of St. Andrews)

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.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7452.

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Length: 36 pages
Date of creation: Jun 2013
Date of revision:
Publication status: published in: IZA Journal of European Labor Studies, 2014, 3, 24.
Handle: RePEc:iza:izadps:dp7452
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