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Subjective well-being, income and relative concerns in the UK

Roberta Distante

MPRA Paper from University Library of Munich, Germany

Abstract: We present an empirical model aimed at testing the relative income hypothesis and the effect of deprivation relative to mean income on subjective well-being. The main concern is to deal with subjective panel data in an ordered response model where error homoskedasticity is not assumed. A heteroskedastic pooled panel ordered probit model with unobserved individual-specific effects is applied to micro-data available in the British Household Panel Survey for 1996-2007. In this framework, absolute income impacts negatively on both completely satisfied and dissatisfied individuals, while relative income affects positively the most satisfied ones. Such an effect is asymmetric, impacting more severely on the relatively poor in the reference group. We argue that our results buttress the validity of the relative income hypothesis as an explanation of the happiness paradox.

Keywords: Subjective Well-being; Relative Income; Absolute Income; Deprivation; Panel Data; Discrete Choice Models. (search for similar items in EconPapers)
JEL-codes: C33 C35 D6 I31 (search for similar items in EconPapers)
Date: 2010-11-12
New Economics Papers: this item is included in nep-dcm
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Journal Article: Subjective Well-Being, Income and Relative Concerns in the UK (2013) Downloads
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