The Role of Income Aspirations in Individual Happiness

Alois Stutzer

No 124, IEW - Working Papers from Institute for Empirical Research in Economics - University of Zurich

Abstract: Does individual well-being depend on the absolute level of income and consumption or is it relative to one's aspirations? In a direct empirical test, it is found that higher income aspirations reduce people's utility, ceteris paribus. Individual data on reported satisfaction with life are used as a proxy measure for utility, and income evaluation measures are applied as proxies for people's aspiration levels. Consistent with processes of adaptation and social comparison, income aspirations increase with people's income as well as with the average income in the community they live in.

Keywords: aspiration level; interdependent preferences; relative income; subjective well-being; utility (search for similar items in EconPapers)
JEL-codes: D60 D63 I31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe, nep-lab, nep-ltv and nep-mic
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Citations: View citations in EconPapers (499)

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Related works:
Journal Article: The role of income aspirations in individual happiness (2004)
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