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The Effect of Income on Positive and Negative Subjective Well-Being

Author

Listed:
  • Stefan Boes

    (Socioeconomic Institute, University of Zurich)

  • Rainer Winkelmann

    (Socioeconomic Institute, University of Zurich)

Abstract

Increasing evidence from the empirical economic and psychological literature suggests that positive and negative well-being are more than opposite ends of the same phenomenon. Two separate measures of the dependent variable may be needed when analyzing the determinants of subjective well-being. We argue that this conclusion reflects in part the use of too restrictive econometric models. A flexible multiple-index ordered probit panel data model with varying thresholds can identify response asymmetries in single-item measures of subjective well-being. An application to data from the German Socio-Economic Panel for 1984-2004 shows that income has only a minor effect on positive subjective well-being but a large effect on negative well-being.

Suggested Citation

  • Stefan Boes & Rainer Winkelmann, 2006. "The Effect of Income on Positive and Negative Subjective Well-Being," SOI - Working Papers 0605, Socioeconomic Institute - University of Zurich.
    • Handle: RePEc:soz:wpaper:0605
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    File URL: https://www.econ.uzh.ch/apps/workingpapers/wp/wp0605.pdf
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    More about this item

    Keywords

    generalized ordered probit model; marginal probability effects; random and fixed effects; life-satisfaction;
    All these keywords.

    JEL classification:

    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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