Income and happiness across Europe: Do reference values matter?

Guglielmo Maria Caporale, Yannis Georgellis (), Nicholas Tsitsianis and Ya Ping Yin

Journal of Economic Psychology, 2009, vol. 30, issue 1, 42-51

Abstract: Using cross-sectional data from the first two rounds of the European Social Survey (ESS), we examine the relationship between income, relative income and happiness across 19 European countries. We find that a positive and statistically significant relationship between income and happiness does exist, but such a relationship is weakened by reference income. We also find that while reference income exerts a negative impact on happiness in the case of Western European countries, its effect is positive in the case of the Eastern European countries, a finding that is consistent with the 'tunnel effect' hypothesis. This suggests that for Eastern Europeans reference income is likely to be a source of information for forming expectations about their future economic prospects, rather than a yardstick measure for social comparisons.

Keywords: Comparison; income; Reference; groups; Happiness; Life; satisfaction (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (129)

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Working Paper: Income and Happiness across Europe: Do Reference Values Matter? (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:joepsy:v:30:y:2009:i:1:p:42-51

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