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Subjective well-being, income and relative concerns in the UK

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  • Distante, Roberta

Abstract

We present an empirical model aimed at testing the relative income hypothesis and the effect of deprivation relative to mean income on subjective well-being. The main concern is to deal with subjective panel data in an ordered response model where error homoskedasticity is not assumed. A heteroskedastic pooled panel ordered probit model with unobserved individual-specific effects is applied to micro-data available in the British Household Panel Survey for 1996-2007. In this framework, absolute income impacts negatively on both completely satisfied and dissatisfied individuals, while relative income affects positively the most satisfied ones. Such an effect is asymmetric, impacting more severely on the relatively poor in the reference group. We argue that our results buttress the validity of the relative income hypothesis as an explanation of the happiness paradox.

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  • Distante, Roberta, 2010. "Subjective well-being, income and relative concerns in the UK," MPRA Paper 30786, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:30786
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    1. repec:spr:soinre:v:133:y:2017:i:2:d:10.1007_s11205-016-1385-3 is not listed on IDEAS
    2. Litchfield, Julie & Reilly, Barry & Veneziani, Mario, 2012. "An analysis of life satisfaction in Albania: An heteroscedastic ordered probit model approach," Journal of Economic Behavior & Organization, Elsevier, vol. 81(3), pages 731-741.
    3. Elena Bárcena-Martín & Cortés Aguilar Alexandra & Ana I. Moro Egido, 2013. "The role of proximity and social comparisons on subjective well-being," ThE Papers 13/10, Department of Economic Theory and Economic History of the University of Granada..
    4. Ángeles Sánchez-Domínguez & Maria J. Ruiz Martos, 2016. "Europe 2020 Strategy Under the Scope of Life Satisfaction," ThE Papers 16/01, Department of Economic Theory and Economic History of the University of Granada..
    5. repec:ssi:jouesi:v:4:y:2016:i:2:p:198-210 is not listed on IDEAS
    6. repec:spr:jhappi:v:18:y:2017:i:4:d:10.1007_s10902-016-9768-3 is not listed on IDEAS

    More about this item

    Keywords

    Subjective Well-being; Relative Income; Absolute Income; Deprivation; Panel Data; Discrete Choice Models.;

    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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