Are Americans Really Less Happy with Their Incomes? (original) (raw)
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In this paper we compute inequality measures over the distribution of a subjective well-being variable constructed from a life satisfaction question included in the Gallup World Poll in almost all countries in the world. We argue that inequality in subjective well-being may be a better proxy for the degree of unfairness in a society than income inequality. We find evidence that inequality in subjective well-being has an inverse-U relationship with per capita GDP, but it is monotonically decreasing with respect to mean subjective well-being. We argue that this difference might be associated to inequality aversion in the space of utility.
1 Life Satisfaction and Keeping up with Other Countries † July , 2014
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Micro income studies show that relative income of individuals—with respect to their colleagues, friends, etc.—affects their life satisfaction significantly. This paper attempts to extend these studies by using the idea that people may compare their well-beings not only to wellbeings of their home country folks but also to well-beings of other country citizens. To test this hypothesis, we form several different country groups that a country may compare itself to and also use several relative deprivation measures. Using data from national surveys of 55 countries carried out from 1973 to 2011, we find that average life satisfaction of a country is significantly affected from how much the country is deprived compared to richer countries in the world. Furthermore, per capita income of country only matters as far as it affects the country’s relative position in the global income distribution. This result, gaining statistical significance after 1990s, is a potential explanation for the par...
This article shows for the first time that people are less satisfied when inequality in their country is higher than before, but not when inequality in their country is higher than in another country. It distinguishes this between-and within-country effect of inequality on life satisfaction by using hybrid regressions with the World Values Survey, the British Household Panel Study, the Australian panel study of Household Income and Labour Dynamics, the Korean Labor and Income Panel, the Russian Longitudinal Monitoring study, the Swiss Household Panel and the German SocioEconomic Panel. That life satisfaction is unaffected by long-run levels of inequality, but by changes of inequality over time, suggests that life satisfaction researchers should focus on changes of inequality over time to understand its influence on life satisfaction.
Income and happiness across Europe: Do reference values matter?
Journal of Economic Psychology, 2009
Using data from the European Social Survey (ESS), we examine the link between income and subjective well-being. We find that, for the whole sample of nineteen European countries, although income is positively correlated with both happiness and life satisfaction, reference income exerts a negative effect on individual well-being, a result consistent with the relative utility hypothesis. Performing separate analyses for some Eastern European countries, we also find some evidence of a 'tunnel effect', in that reference income has a positive impact on subjective well-being. Our findings support the view that in environments with stable income and employment, reference income serves as a basis for social comparisons, whereas in relatively volatile environments, it is used as a source of information for forming expectations about future status.
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The purpose in the present paper is to use individual panel data in the European Community Household Panel to analyse the impact on self-reported satisfaction from a number of economic and demographic variables. The paper contributes to the ongoing discussion of the relationship between life satisfaction and income. The panel property of the data makes it possible to study also the impact on satisfaction from income changes as well as the impact from acceleration in income and changes in labour market status on changes in satisfaction. A number of demographic variables and individual attitude indicators are also entered into the analysis of both the level of satisfaction and the change in satisfaction from one wave of the survey to the next. We find a strong impact from the level of income in all countries, an impact from change and acceleration in income for a smaller number of countries, a strong impact from most changes in labour market status and finally important effects from a number of demographic variables.
Are more equal societies happier? Subjective well-being, income inequality, and redistribution
Using four waves of the European Social Survey, we analyze the association of income inequality and redistribution with subjective well-being. Our results provide evidence that people in Europe are negatively affected by income inequality, while reduction of inequality has a positive effect on well-being. Since we simultaneously estimate the effects of inequality and its reduction, our results indicate that not only the perceived income inequality what influences subjective well-being, but also the process, the extent of redistribution, what lead to that state. These impacts are different in Eastern and Western Europe. Inequality aversion and the positive effect of redistribution seem to be stronger also for less affluent members of the societies and left-wing oriented individuals.
Income and well-being: an empirical analysis of the comparison income effect
Journal of Public Economics, 2005
This paper presents an empirical analysis of the importance of dcomparison incomeT for individual well-being or happiness. In other words, the influence of the income of a reference group on individual well-being is examined. The main novelty is that various hypotheses are tested: the importance of the own income, the relevance of the income of the reference group and of the distance between the own income and the income of the reference group, and most importantly the asymmetry of comparisons, i.e. the comparison income effect differing between rich and poor individuals. The analysis uses a self-reported measure of satisfaction with life as a measure of individual well-being. The data come from a large German panel known as GSOEP. The study concludes that the income of the reference group is about as important as the own income for individual happiness, that individuals are happier the larger their income is in comparison with the income of the reference group, and that for West Germany this comparison effect is asymmetric. This final result supports Dusenberry's idea that comparisons are mostly upwards.
Life Satisfaction and Relative Income: Perceptions and Evidence
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Using a unique dataset we study both the actual and self-perceived relationship between subjective well-being and income comparisons against a wide range of potential comparison groups, enabling us to investigate a broader range of questions than in previous studies. In questions inserted into a 2008 module of the German-Socio Economic Panel Study we ask subjects to report (a) how their income compares to various groups, such a co-workers, friends, and neighbours, and (b) how important these income comparisons are to them. We find substantial gender differences, with income comparisons being much better predictors of subjective well-being in men than in women. Generic (same-gender) comparisons are the most important, followed by within profession comparisons. Once generic and withinprofession comparisons are controlled for, income relative to neighbours has a negative coefficient, implying that living in a high-income neighbourhood increases happiness. The perceived importance of income comparisons is found to be uncorrelated with its actual relationship to subjective well-being, suggesting that people are unconscious of its real impact. Subjects who judge comparisons to be important are, however, significantly less happy than subjects who see income comparisons as unimportant. Finally, the marginal effect of relative income on subjective well-being does not depend on whether a subject is below or above the reference group income.
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Self-reported life satisfaction is highly heterogeneous across similar countries. We show that this phenomenon can by largely explained by the fact that individuals adopt different scales and benchmarks in evaluating themselves. Using a cross sectional dataset on individuals aged 50 and over in ten European countries, we compare estimates from an Ordered Probit in which life satisfaction scales are invariant across respondents with those from a Hopit model in which vignettes are used to correct for individual-specific scale biases. We find that variations in response scales explain a large part of the differences found in raw data. Moreover, the cross countries ranking in life satisfaction dramatically depends on scale biases.
Inequality and happiness: are Europeans and Americans different
We study the effect of the level of inequality in society on individual well-being using a total of 123,668 answers to a survey question about ''happiness''. We find that individuals have a lower tendency to report themselves happy when inequality is high, even after controlling for individual income, a large set of personal characteristics, and year and country (or, in the case of the US, state) dummies. The effect, however, is more precisely defined statistically in Europe than in the US. In addition, we find striking differences across groups. In Europe, the poor and those on the left of the political spectrum are unhappy about inequality; whereas in the US the happiness of the poor and of those on the left is uncorrelated with inequality. Interestingly, in the US, the rich are bothered by inequality. Comparing across continents, we find that left-wingers in Europe are more hurt by inequality than left-wingers in the US. And the poor in Europe are more concerned with inequality than the poor in America, an effect that is large in terms of size but is only significant at the 10% level. We argue that these findings are consistent with the perception (not necessarily the reality) that Americans have been living in a mobile society, where individual effort can move people up and down the income ladder, while Europeans believe that they live in less mobile societies. D