Income and Happiness: New Results from Generalized Threshold and Sequential Models
Stefan Boes () and
Rainer Winkelmann ()
No 1175, IZA Discussion Papers from Institute for the Study of Labor (IZA)
Empirical studies on the relationship between income and happiness commonly use standard ordered response models, the most well-known representatives being the ordered logit and the ordered probit. However, these models restrict the marginal probability effects by design, and therefore limit the analysis of distributional aspects of a change in income, that is, the study of whether the income effect depend on a person's happiness. In this paper we pinpoint the shortcomings of standard models and propose two alternatives, namely generalized threshold and sequential models. With data of two waves of the German Socio- Economic Panel, 1984 and 1997, we show that the more general models yield different marginal probability effects than standard models.
Keywords: subjective well-being; ordered response models; marginal effects (search for similar items in EconPapers)
JEL-codes: C25 I31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dcm, nep-lab and nep-ltv
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Published in: Social Indicators Research, 2010, 95 (1), 111-128
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Working Paper: Income and Happiness: New Results from Generalized Threshold and Sequential Models (2004)
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