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How much does money really matter? Estimating the causal effects of income on happiness
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Powdthavee, Nattavudh (2010) How much does money really matter? Estimating the causal effects of income on happiness. Empirical Economics, 39 (1). pp. 77-92. doi:10.1007/s00181-009-0295-5 ISSN 0377-7332.
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Official URL: http://dx.doi.org/10.1007/s00181-009-0295-5
Abstract
There is a long tradition of psychologists finding small income effects on life satisfaction (or happiness). Yet the issue of income endogeneity in life satisfaction equations has rarely been addressed. The present paper is an attempt to estimate the causal effect of income on happiness. Instrumenting for income and allowing for unobserved heterogeneity result in an estimated income effect that is almost twice as large as the estimate in the basic specification. The results call for a reexamination on previous findings that suggest money buys little happiness, and a reevaluation on how the calculation of compensatory packages to various shocks in the individual’s life events should be designed.
| Item Type: | Journal Article | ||||
|---|---|---|---|---|---|
| Divisions: | Faculty of Social Sciences > Warwick Business School | ||||
| Journal or Publication Title: | Empirical Economics | ||||
| Publisher: | Physica-Verlag GmbH und Co. | ||||
| ISSN: | 0377-7332 | ||||
| Official Date: | 2010 | ||||
| Dates: |
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| Volume: | 39 | ||||
| Number: | 1 | ||||
| Page Range: | pp. 77-92 | ||||
| DOI: | 10.1007/s00181-009-0295-5 | ||||
| Status: | Peer Reviewed | ||||
| Publication Status: | Published | ||||
| Access rights to Published version: | Restricted or Subscription Access |
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