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Money, well-being, and loss aversion : does an income loss have a greater effect on well-being than an equivalent income gain?
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Boyce, Christopher J., Wood, Alex M., Banks, James (Economist), Clarke, Andrew C. and Brown, G. D. A. (Gordon D. A.) (2013) Money, well-being, and loss aversion : does an income loss have a greater effect on well-being than an equivalent income gain? Psychological Science, Volume 24 (Number 12). pp. 2557-2562. doi:10.1177/0956797613496436 ISSN 0956-7976.
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Official URL: http://dx.doi.org/10.1177/0956797613496436
Abstract
Higher income is associated with greater well-being, but do income gains and losses affect well-being differently? Loss aversion, whereby losses loom larger than gains, is typically examined in relation to decisions about anticipated outcomes. Here, using subjective-well-being data from Germany (N = 28,723) and the United Kingdom (N = 20,570), we found that losses in income have a larger effect on well-being than equivalent income gains and that this effect is not explained by diminishing marginal benefits of income to well-being. Our findings show that loss aversion applies to experienced losses, challenging suggestions that loss aversion is only an affective-forecasting error. By failing to account for loss aversion, longitudinal studies of the relationship between income and well-being may have overestimated the positive effect of income on well-being. Moreover, societal well-being might best be served by small and stable income increases, even if such stability impairs long-term income growth.
Item Type: | Journal Article | ||||
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Subjects: | H Social Sciences > HC Economic History and Conditions | ||||
Divisions: | Faculty of Science, Engineering and Medicine > Science > Life Sciences (2010- ) Faculty of Science, Engineering and Medicine > Science > Psychology |
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Library of Congress Subject Headings (LCSH): | Income, Well-being -- Economic aspects | ||||
Journal or Publication Title: | Psychological Science | ||||
Publisher: | Wiley-Blackwell Publishing Ltd. | ||||
ISSN: | 0956-7976 | ||||
Official Date: | 2013 | ||||
Dates: |
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Volume: | Volume 24 | ||||
Number: | Number 12 | ||||
Page Range: | pp. 2557-2562 | ||||
DOI: | 10.1177/0956797613496436 | ||||
Status: | Peer Reviewed | ||||
Publication Status: | Published | ||||
Access rights to Published version: | Restricted or Subscription Access | ||||
Funder: | Economic and Social Research Council (Great Britain) (ESRC), Leverhulme Trust (LT) | ||||
Grant number: | PTA-026-27-2665, RES-062-23-2462, and ES/K002201/1 (ESRC); RP2012-V-022 (LT) |
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