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The poor, the rich and the happy: exploring the link between income and subjective well-being

The poor, the rich and the happy: exploring the link between income and subjective well-being
The poor, the rich and the happy: exploring the link between income and subjective well-being
The relationship between income and subjective well-being (SWB) is investigated using eight waves of the British Household Panel Survey and an estimation strategy that allows us to relax some assumptions typically made in the literature. First, we use a random effects generalised ordered probit model to investigate whether income effects are heterogeneous across SWB categories, and, second, we discretise (absolute and relative) income variables to allow for the income effects to vary across income groups. We find that higher absolute income increases SWB but up to a certain level, while low income is significantly correlated with low scores in the SWB ladder. Our results are consistent with the Easterlin Paradox that has been reported in the literature. We find that high-income groups are less likely to belong in the highest SWB level, which could be partly explained by the fact that the relative income status (rather than the absolute one) is more important in determining (the highest level of) SWB.
Well-being, Happiness, Income, Relative income, Generalised models, Heterogeneity
1053-5357
147-158
Mentzakis, Emmanouil
c0922185-18c7-49c2-a659-8ee6d89b5d74
Moro, Mirko
4083e183-e950-4252-9ca1-f37364a46b30
Mentzakis, Emmanouil
c0922185-18c7-49c2-a659-8ee6d89b5d74
Moro, Mirko
4083e183-e950-4252-9ca1-f37364a46b30

Mentzakis, Emmanouil and Moro, Mirko (2009) The poor, the rich and the happy: exploring the link between income and subjective well-being. Journal of Socio-Economics, 38 (1), 147-158. (doi:10.1016/j.socec.2008.07.010).

Record type: Article

Abstract

The relationship between income and subjective well-being (SWB) is investigated using eight waves of the British Household Panel Survey and an estimation strategy that allows us to relax some assumptions typically made in the literature. First, we use a random effects generalised ordered probit model to investigate whether income effects are heterogeneous across SWB categories, and, second, we discretise (absolute and relative) income variables to allow for the income effects to vary across income groups. We find that higher absolute income increases SWB but up to a certain level, while low income is significantly correlated with low scores in the SWB ladder. Our results are consistent with the Easterlin Paradox that has been reported in the literature. We find that high-income groups are less likely to belong in the highest SWB level, which could be partly explained by the fact that the relative income status (rather than the absolute one) is more important in determining (the highest level of) SWB.

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More information

Published date: January 2009
Keywords: Well-being, Happiness, Income, Relative income, Generalised models, Heterogeneity
Organisations: Economics

Identifiers

Local EPrints ID: 345212
URI: http://eprints.soton.ac.uk/id/eprint/345212
ISSN: 1053-5357
PURE UUID: 18ee27a6-3cfd-4694-8137-c91f7fb282d2
ORCID for Emmanouil Mentzakis: ORCID iD orcid.org/0000-0003-1761-209X

Catalogue record

Date deposited: 13 Nov 2012 15:11
Last modified: 12 Nov 2019 01:39

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