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Reference dependent financial satisfaction over the course of the Celtic Tiger: a panel analysis utilising the Living in Ireland Survey 1994-2 001

  • Delaney, Liam
  • Newman, Carol
  • Nolan, Brian

The link between income and subjective satisfaction with one's financial situation is explored in this paper using a panel analysis of 4,000 individuals tracked through the course of the 'Celtic Tiger' boom period, 1994-2001. The impact of the level of individual and household income, the time-path of income and the impact of reference group income on financial satisfaction are all considered. To the extent that income influences financial satisfaction, there is strong evidence from this paper that household income has a greater effect on financial satisfaction than individual income. There is also evidence that changes in income have an independent effect on financial satisfaction with the time derivative of income entering positively in the financial satisfaction equation. Thus, our paper gives further evidence to support the hypothesis that individuals process changes as well as absolute levels of income. While reference group income has a negative effect at the start of the period it has no effect at the end.

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File URL: http://hdl.handle.net/1893/11608
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Paper provided by University of Stirling, Division of Economics in its series Stirling Economics Discussion Papers with number p200611.

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Date of creation: Jun 2006
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Handle: RePEc:stl:stledp:p200611
Contact details of provider: Postal: Division of Economics, University of Stirling, Stirling, Scotland FK9 4LA
Phone: +44 (0)1786 467473
Fax: +44 (0)1786 467469
Web page: http://www.econ.stir.ac.uk/

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  1. Andrew Clark, 2001. "Unemployment As A Social Norm: Psychological Evidence from Panel Data," DELTA Working Papers 2001-17, DELTA (Ecole normale supérieure).
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  8. Rabin, Matthew, 1997. "Psychology and Economics," Department of Economics, Working Paper Series qt8jd5z5j2, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
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  10. Ferrer-i-Carbonell, Ada, 2005. "Income and well-being: an empirical analysis of the comparison income effect," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 997-1019, June.
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  12. Armin Falk & Markus Knell, 2004. "Choosing the Joneses: Endogenous Goals and Reference Standards," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(3), pages 417-435, October.
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