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Do Losses Bite More than Gains? Evidence from a Panel Quantile Regression Analysis of Subjective Well-being in Japan

Zheng Fang () and Yoko Niimi ()

No 1507, Economic Growth Centre Working Paper Series from Nanyang Technological University, School of Social Sciences, Economic Growth Centre

Abstract: This paper conducts an empirical analysis of the distributional effects of the determinants of happiness by applying quantile regression techniques to panel data from the “Preference Parameters Study” of Osaka University, a nationally representative survey conducted in Japan. The key question examined in the paper is whether we observe an asymmetry between the effects of positive and negative changes on individual happiness, and if it exists, whether it is observed uniformly across the happiness distribution. Such an asymmetry is referred to as loss aversion in prospect theory. Loss aversion effects are analyzed with respect to relative income as well as expected future income changes. We find that feeling relatively poor has a greater negative effect on happiness than the positive effect of feeling relatively rich, i.e., losses bite more than gains. However, no evidence for loss aversion is detected with respect to expected future income changes as individual happiness is found to be more sensitive to gains than to losses, though the happiness of the least happy group is found to be affected more by losses than by equivalent gains.

Keywords: Happiness; Japan; loss aversion; panel quantile regression; subjective well-being (search for similar items in EconPapers)
JEL-codes: I31 C31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-hap and nep-sea
Date: 2015-11
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Working Paper: Do Losses Bite More than Gains? Evidence from a Panel Quantile Regression Analysis of Subjective Well-being in Japan (2015) Downloads
Working Paper: Do Losses Bite More than Gains? Evidence from a Panel Quantile Regression Analysis of Subjective Well-being in Japan (2015) Downloads
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