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

Sarah Brown () and Daniel Gray ()
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Daniel Gray: Department of Economics, University of Sheffield

No 2014015, Working Papers from The University of Sheffield, Department of Economics

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: financial satisfaction; fixed effects ordered logit; household finances; overall life satisfaction; subjective prosperity (search for similar items in EconPapers)
JEL-codes: D14 I31 J28 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2014-10
New Economics Papers: this item is included in nep-dcm, nep-eur and nep-hap
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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http://www.shef.ac.uk/economics/research/serps/articles/2014_015.html First version, October 2014 (application/pdf)

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Working Paper: Household Finances and Well-Being: An Empirical Analysis of Comparison Effects (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:shf:wpaper:2014015

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