Distante, Roberta (2010): Subjective well-being, income and relative concerns in the UK.
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We present an empirical model aimed at testing the relative income hypothesis and the effect of deprivation relative to mean income on subjective well-being. The main concern is to deal with subjective panel data in an ordered response model where error homoskedasticity is not assumed. A heteroskedastic pooled panel ordered probit model with unobserved individual-specific effects is applied to micro-data available in the British Household Panel Survey for 1996-2007. In this framework, absolute income impacts negatively on both completely satisfied and dissatisfied individuals, while relative income affects positively the most satisfied ones. Such an effect is asymmetric, impacting more severely on the relatively poor in the reference group. We argue that our results buttress the validity of the relative income hypothesis as an explanation of the happiness paradox.
|Item Type:||MPRA Paper|
|Original Title:||Subjective well-being, income and relative concerns in the UK|
|Keywords:||Subjective Well-being; Relative Income; Absolute Income; Deprivation; Panel Data; Discrete Choice Models.|
|Subjects:||D - Microeconomics > D6 - Welfare Economics
I - Health, Education, and Welfare > I3 - Welfare and Poverty > I31 - General Welfare
C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models; Multiple Variables > C35 - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models; Multiple Variables > C33 - Models with Panel Data; Longitudinal Data; Spatial Time Series
|Depositing User:||ROBERTA DISTANTE|
|Date Deposited:||08. May 2011 23:39|
|Last Modified:||12. Feb 2013 15:36|
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