Money and Happiness: Income, Wealth and Subjective Well-Being

Conchita D’Ambrosio (), Markus Jäntti () and Anthony Lepinteur
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Conchita D’Ambrosio: University of Luxembourg
Markus Jäntti: Stockholm University
Authors registered in the RePEc Author Service: Conchita D'Ambrosio

Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, 2020, vol. 148, issue 1, No 2, 47-66

Abstract: Abstract We examine the complex relationship between money and happiness. We find that both permanent income and wealth are better predictors of life satisfaction than current income and wealth. They matter not only in absolute terms but also in comparative terms. However, their relative impacts differ. The first exerts a comparison effect—the higher the permanent income of the reference group, the lower life satisfaction—the second exerts an information effect—the higher the permanent wealth of the reference group, the higher life satisfaction. We also show that negative transitory shocks to income reduce life satisfaction while transitory shocks to wealth have no effect. Lastly, we analyse the effects of their components and find that not all of them predict life satisfaction: permanent taxes do not matter, while only the value of permanent real estate, financial and business assets do. Finally, we use quantile regression and analyse to what extent our results vary along the well-being distribution, finding the impacts to be larger at lower levels of life satisfaction.

Keywords: Permanent income; Permanent wealth; Life satisfaction; SOEP (search for similar items in EconPapers)
JEL-codes: D60 I30 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (33)

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DOI: 10.1007/s11205-019-02186-w

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