Connecting the dots: continuity in the relationship between income and emotional well-being

Manja Derlin (), Carina Keldenich () and Andreas Knabe ()
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Manja Derlin: Faculty of Economics and Management, Otto-von-Guericke University Magdeburg
Carina Keldenich: Faculty of Economics and Management, Otto-von-Guericke University Magdeburg
Andreas Knabe: Faculty of Economics and Management, Otto-von-Guericke University Magdeburg

No 26002, FEMM Working Papers from Otto-von-Guericke University Magdeburg, Faculty of Economics and Management

Abstract: We examine how functional-form assumptions affect conclusions about the existence of satiation in the relationship between income and emotional well-being. Previous studies have estimated a piecewise log-linear model with one structural break in both intercept and slope, which may lead to discontinuities in the estimated relationship. We show that imposing continuity in this type of model in OLS and quantile regressions substantially alters inferences about income satiation. At commonly applied thresholds, satiation disappears. The threshold shifts upwards when determined by best statistical fit and satiation re-emerges only at very high incomes. These findings demonstrate that the presence and location of satiation are highly sensitive to modeling choices.

Keywords: income; emotional well-being; experience sampling method (search for similar items in EconPapers)
JEL-codes: C21 D12 I31 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2026-02
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Persistent link: https://EconPapers.repec.org/RePEc:mag:wpaper:26002

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