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Are Americans Really Less Happy With Their Incomes?

  • Arie Kapteyn

    ()

  • James P. Smith

    ()

  • Arthur van Soest

    ()

Recent economic research on international comparisons of subjective well-being suffers from several important biases due to the potential incomparability of response scales within and across countries. In this paper the authors concentrate on self-reported satisfaction with income in two countries: The Netherlands and the U.S. The comparability problem is addressed by using anchoring vignettes. They find that in the raw data, Americans appear decidedly less satisfied with their income than the Dutch. It turns out however that after response scale adjustment based on vignettes the distribution of satisfaction in the two countries is essentially identical. In addition, they find that the within-country cross-sectional effect of income on satisfaction- a key parameter in the recent debate in the economic literature- is significantly under-estimated especially in the US- when differences in response scales are not taken into account.

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Paper provided by RAND Corporation Publications Department in its series Working Papers with number 858.

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Length: 38 pages
Date of creation: May 2011
Date of revision:
Handle: RePEc:ran:wpaper:858
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  1. Arie Kapteyn & James P. Smith & Arthur van Soest, 2007. "Vignettes and Self-Reports of Work Disability in the United States and the Netherlands," American Economic Review, American Economic Association, vol. 97(1), pages 461-473, March.
  2. Peggy Schyns, 2002. "Wealth Of Nations, Individual Income andLife Satisfaction in 42 Countries:A Multilevel Approach," Social Indicators Research, Springer, vol. 60(1), pages 5-40, December.
  3. Arthur van Soest & Liam Delaney & Colm Harmon & Arie Kapteyn & James P. Smith, 2007. "Validating the Use of Vignettes for Subjective Threshold Scales," Working Papers 501, RAND Corporation Publications Department.
  4. Kristensen, Nicolai & Johansson, Edvard, 2006. "New Evidence on Cross-Country Differences in Job Satisfaction Using Anchoring Vignettes," Working Papers 06-1, University of Aarhus, Aarhus School of Business, Department of Economics.
  5. Betsey Stevenson & Justin Wolfers, 2008. "Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox," NBER Working Papers 14282, National Bureau of Economic Research, Inc.
  6. van de Stadt, Huib & Kapteyn, Arie & van de Geer, Sara, 1985. "The Relativity of Utility: Evidence from Panel Data," The Review of Economics and Statistics, MIT Press, vol. 67(2), pages 179-87, May.
  7. Bonsang Eric & Soest Arthur van, 2010. "Satisfaction with job and income among older individuals across European countries," Research Memorandum 059, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  8. Stanovnik, Tine, 1992. "Perception of poverty and income satisfaction : An empirical analysis of Slovene households," Journal of Economic Psychology, Elsevier, vol. 13(1), pages 57-69, March.
  9. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2008. "Relative Income, Happiness, and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," Journal of Economic Literature, American Economic Association, vol. 46(1), pages 95-144, March.
  10. Blanchflower, David G. & Oswald, Andrew J., 2004. "Well-being over time in Britain and the USA," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1359-1386, July.
  11. Di Tella, Rafael & Alesina, Alberto & MacCulloch, Robert, 2004. "Inequality and Happiness: Are Europeans and Americans Different?," Scholarly Articles 4553007, Harvard University Department of Economics.
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  13. Nigel Rice & Silvana Robone & Peter Smith, 2011. "Analysis of the validity of the vignette approach to correct for heterogeneity in reporting health system responsiveness," The European Journal of Health Economics, Springer, vol. 12(2), pages 141-162, April.
  14. Teresa Bago d'Uva & Eddy Van Doorslaer & Maarten Lindeboom & Owen O'Donnell, 2008. "Does reporting heterogeneity bias the measurement of health disparities?," Health Economics, John Wiley & Sons, Ltd., vol. 17(3), pages 351-375.
  15. 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.
  16. 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.
  17. Bernard M. S. van Praag & P. Frijters & Ada Ferrer-i-Carbonell, 2001. "The Anatomy of Subjective Well-Being," Discussion Papers of DIW Berlin 265, DIW Berlin, German Institute for Economic Research.
  18. Bernard M. S. van Praag & Nico L. van der Sar, 1988. "Household Cost Functions and Equivalence Scales," Journal of Human Resources, University of Wisconsin Press, vol. 23(2), pages 193-210.
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  22. Johannes Schwarze, 2003. "Using Panel Data on Income Satisfaction to Estimate Equivalence Scale Elasticity," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 49(3), pages 359-372, 09.
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