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When Experienced and Decision Utility Concur: The Case of Income Comparisons

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  • Clark, Andrew E.

    () (Paris School of Economics)

  • Senik, Claudia

    () (Paris School of Economics)

  • Yamada, Katsunori

    () (Kindai University)

Abstract

While there is now something of a consensus in the literature on the economics of happiness that income comparisons to others help determine subjective wellbeing, debate continues over the relative importance of own and reference-group income, in particular in research on the Easterlin paradox. The variety of results in this domain have produced some scepticism regarding happiness analysis, and in particular with respect to the measurement of reference-group income. We here use data from an original Internet survey in Japan to compare the results from happiness regressions to those from hypothetical-choice experiments. The trade-off between own and others' income (showing the importance of absolute and relative income) is similar in these two sets of results. This kind of validation of experienced utility via direct comparison with decision utility remains rare in this literature.

Suggested Citation

  • Clark, Andrew E. & Senik, Claudia & Yamada, Katsunori, 2015. "When Experienced and Decision Utility Concur: The Case of Income Comparisons," IZA Discussion Papers 9189, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp9189
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. When Experienced and Decision Utility Concur: The Case of Income Comparisons By: Clark, Andrew E. (Paris School of Economics) ; Senik, Claudia (Paris School of Economics) ; Yamada, Katsunori (Kindai University)
      by maximorossi in NEP-LTV blog on 2015-07-30 22:22:41

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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. Piekalkiewicz, Marcin, 2016. "Money, Social Capital and Materialism. Evidence from Happiness Data," EconStor Preprints 130185, ZBW - German National Library of Economics.
    3. Akay, Alpaslan & Bargain, Olivier & Jara, Xavier, 2017. "'Fair' Welfare Comparisons with Heterogeneous Tastes: Subjective versus Revealed Preferences," IZA Discussion Papers 10908, Institute for the Study of Labor (IZA).
    4. Kaiser, Caspar, 2018. "People do not adapt to income changes: A re-evaluation of the dynamic effects of (reference) income on life satisfaction with GSOEP and UKHLS data," MPRA Paper 89867, University Library of Munich, Germany.
    5. Akay, Alpaslan & Bargain, Olivier & Jara, Xavier, 2017. "Back to Bentham, Should We? Large-Scale Comparison of Experienced versus Decision Utility," IZA Discussion Papers 10907, Institute for the Study of Labor (IZA).
    6. Sun Youn Lee & Fumio Ohtake, 2018. "How Conscious Are You of Others? Further Evidence on Relative Income and Happiness," ISER Discussion Paper 1022, Institute of Social and Economic Research, Osaka University.
    7. Nicolas L. Bottan & Ricardo Perez-Truglia, 2017. "Choosing Your Pond: Location Choices and Relative Income," NBER Working Papers 23615, National Bureau of Economic Research, Inc.
    8. Akay, Alpaslan & Bargain, Olivier B. & Jara, H. Xavier, 2017. "Back to Bentham, Should We? Large-Scale Comparison of Experienced versus Decision Utility," GLO Discussion Paper Series 52, Global Labor Organization (GLO).

    More about this item

    Keywords

    satisfaction; income comparisons; reference-group income; discrete-choice experiments;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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