Hedonic Adaptation to Living Standards and the Hidden Cost of Parental Income

Stefan Boes (), Kevin Staub () and Rainer Winkelmann ()
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Kevin Staub: Socioeconomic Institute, University of Zurich

No 713, Working Papers from University of Zurich, Socioeconomic Institute

Abstract: High parental income, while undeniably causing beneÞts for a child in terms of better access to education and more favorable labor market outcomes, may at the same time increase a childÕs income aspirations and thereby reduce Þnancial satisfaction, ceteris paribus. In this paper, we investigate the relationship between Þnancial satisfaction and parental income with data from the German Socio-Economic Panel. The results indicate that there is indeed a negative well-being externality of parental income, and that children appear to compare their actual income situation with the aspiration level acquired while growing up.

Keywords: Welfare; happiness; income norm; subjective well-being (search for similar items in EconPapers)
JEL-codes: D62 I31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-hap
Date: 2007-10
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Persistent link: http://EconPapers.repec.org/RePEc:soz:wpaper:0713

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