Subjective Well-Being, Income and Relative Concerns in the UK

Abstract

We present an empirical model aimed at testing the relative income hypothesis and the e¤ect 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-speci…c e¤ects 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 satis…ed and dissatis…ed individuals, while relative income a¤ects positively the most satis…ed ones. Such an e¤ect 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.

The Impact of Self‐Perceived Relative Income on Life Satisfaction: Evidence from British Panel Data

“…This suggests that the correlation between an individual's SWB and relative financial situation is not conditional on the savings or wealth of the individual. Distante (2013) shows that around 75% of the sample are very satisfied with their lives. Peng (2017) using the British Household Panel Survey shows similar numbers.…”

“…This figure is consistent with other work using British data. For example, using the data of the British Household Panel Survey for 1996–2007, Distante () shows that around 75% of the sample are very satisfied with their lives. Peng () using the British Household Panel Survey shows similar numbers.…”

“…Their results also showed that once individual fixed effects are controlled for, the coefficient of household income on SWB drops significantly (e.g., Ferrer‐i‐Carbonell and Frijters ; Boyce and Wood ). Some studies have found positive but weak or even negative relationship between income and SWB (Diener et al ; Argyle ; Distante ; Tibesigwa et al ). See Ferrer‐i‐Carbonell and Frijters () for more discussion.…”

“…2001; Blanchflower and Oswald 2004;Luttmer 2005;Distante 2013;Peng 2017). This groupaverage approach of income comparison might be problematic, however, because the selection of the reference group is rather arbitrary, the relevance of the reference group defined this way may be questionable.…”

Pobreza multidimensional e seus aspectos subjetivos em contextos rurais e urbanos nordestinos

“…No entanto, este estudo entende os aspectos subjetivos da pobreza não como um valor monetário, mas como a autopercepção do indivíduo como pobre. Identifica-se que esta percepção pode estar vinculada a identificação, a perspectiva de escolhas que, segundo Distante (2013), estão relacionadas à estrutura cognitiva do indivíduo, ao contexto cultural e as ambições pessoais.…”