Household Finances and Well-Being: An Empirical Analysis of Comparison Effects

Sarah Brown () and Daniel Gray ()
Additional contact information
Daniel Gray: University of Sheffield

No 8530, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper explores the importance of the household's financial position for an individual's level of well-being. Initially, the empirical analysis, based on a large nationally representative panel survey, aims to ascertain the impact of the household's monetary financial position on overall life satisfaction and financial well-being, with the latter being measured by financial satisfaction and subjective prosperity. Taking into account monetary factors in addition to income, the results indicate that the household's level of net wealth, assets and debt are important determinants of overall life satisfaction and financial well-being. The paper also explores whether the financial situation of households in a comparison group influences an individual's overall life satisfaction and financial well-being. The results suggest that the financial position of households in the comparison group is an important determinant of an individual's level of overall life satisfaction and financial well-being, with information effects generally dominating comparison effects. In addition, the effects of the comparison group are asymmetric depending on whether a household's financial position is above or below the average of the reference group and vary over the life-cycle.

Keywords: overall life satisfaction; household finances; fixed effects ordered logit; financial satisfaction; subjective prosperity (search for similar items in EconPapers)
JEL-codes: D14 I31 J28 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2014-10
New Economics Papers: this item is included in nep-hap
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Citations: View citations in EconPapers (1)

Published - published in: Journal of Economic Psychology, 2016, 53, 17–36

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Working Paper: Household Finances and Well-Being: An Empirical Analysis of Comparison Effects (2014)
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