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Connecting the dots: continuity in the relationship between income and emotional well-being

Author

Listed:
  • Manja Derlin

    (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)

  • Carina Keldenich

    (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)

  • Andreas Knabe

    (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)

Abstract

We examine how functional-form assumptions affect conclusions about the existence of satiation in the relationship between income and emotional well-being. Previous studies have estimated a piecewise log-linear model with one structural break in both intercept and slope, which may lead to discontinuities in the estimated relationship. We show that imposing continuity in this type of model in OLS and quantile regressions substantially alters inferences about income satiation. At commonly applied thresholds, satiation disappears. The threshold shifts upwards when determined by best statistical fit and satiation re-emerges only at very high incomes. These findings demonstrate that the presence and location of satiation are highly sensitive to modeling choices.

Suggested Citation

  • Manja Derlin & Carina Keldenich & Andreas Knabe, 2026. "Connecting the dots: continuity in the relationship between income and emotional well-being," FEMM Working Papers 26002, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
    • Handle: RePEc:mag:wpaper:26002
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    Keywords

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    JEL classification:

    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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