Income comparisons, income adaptation, and life satisfaction: How robust are estimates from survey data?
Theory suggests that subjective well-being is affected by income comparisons and adaptation to income. Empirical tests of the effects often rely on self-constructed measures from survey data. This paper shows that results can be highly sensitive to simple parameter changes. Using large-scale panel data from Germany and the UK, I report cases where plausible variations in the underlying income type substantially affect tests of the relationship between life satisfaction, income rank, reference income, and income adaptation. Models simultaneously controlling for income and income rank as well as models with a number of income lags are prone to imperfect multicollinearity with consequences for the precision and robustness of estimates. When testing relative-income effects, researchers should be aware that reference income constructed as average of a rather arbitrarily defined reference group and reference income predicted from Mincer-type earnings equations are two approaches that can produce inconsistent results, and that are probably not as reliable and valid as previously assumed. The analysis underlines the importance of robustness checks and regression diagnostics, two routines that are often not carried out diligently in empirical research.
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Postal: Universitätsstr. 14-16, 48143 Münster|
Phone: 02 51 / 83-2 29 10
Fax: 02 51 / 83-2 83 99
Web page: http://www.wiwi.uni-muenster.de/ciw/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Stefan Boes & Kevin E. Staub & Rainer Winkelmann, 2008.
"Relative status and satisfaction,"
SOI - Working Papers
0816, Socioeconomic Institute - University of Zurich.
- Alpaslan Akay & Olivier Bargain & Klaus F. Zimmermann, 2011.
"Relative Concerns of Rural-to-Urban Migrants in China,"
201102, Geary Institute, University College Dublin.
- Akay, Alpaslan & Bargain, Olivier & Zimmermann, Klaus F., 2012. "Relative concerns of rural-to-urban migrants in China," Journal of Economic Behavior & Organization, Elsevier, vol. 81(2), pages 421-441.
- AKAY Alpaslan & BARGAIN Olivier & ZIMMERMANN Klaus F., 2011. "Relative Concerns of Rural-to-Urban Migrants in China," LISER Working Paper Series 2011-12, LISER.
- Alpaslan Akay & Olivier Bargain & Klaus F. Zimmermann, 2011. "Relative Concerns of Rural-to-Urban Migrants in China," Working Papers 201104, School of Economics, University College Dublin.
- Akay, Alpaslan & Bargain, Olivier & Zimmermann, Klaus F., 2011. "Relative Concerns of Rural-to-Urban Migrants in China," IZA Discussion Papers 5480, Institute for the Study of Labor (IZA).
When requesting a correction, please mention this item's handle: RePEc:zbw:ciwdps:52013. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.