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The hump-shaped relation between income and life satisfaction
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Proto, Eugenio and Rustichini, Aldo (2011) The hump-shaped relation between income and life satisfaction. In: National Bureau of Economic Research Summer Institute 2011 : Income Distribution and Macroeconomics Workshop, Cambridge, Massachusetts, 19-22 Jul 2011 (Unpublished)
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Official URL: http://www.nber.org/confer/2011/SI2011/EFBGZ/Proto...
Abstract
Individual Life Satisfaction depends in a hump-shaped way on household income, peaking around 150K-200K USD per year, and decreasing for larger values. This conclusion holds after controlling for a large set of potentially moderating factors, and for country and regional (European) average values.
A major puzzle follows: if higher income produces a reduction in Life Satisfaction, why should individuals strive to increase income? We test a potential explanation using individual personality traits. They all affect directly Life Satisfaction, but only Neuroticism systematically affects its relation with income. Life Satisfaction is never decreasing in income in individuals with low neuroticism. In high neuroticism individuals, Life Satisfaction peaks around 90K-120K USD, and decreases for higher values. We provide and test an explanation of these findings based on sensitivity to the gap between aspiration and realization in level of income.
Item Type: | Conference Item (Paper) | ||||
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Subjects: | H Social Sciences > HB Economic Theory | ||||
Divisions: | Faculty of Social Sciences > Economics | ||||
Official Date: | 20 July 2011 | ||||
Dates: |
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Status: | Not Peer Reviewed | ||||
Publication Status: | Unpublished | ||||
Funder: | Economic and Social Research Council (ESRC), National Science Foundation (U.S.) (NSF) | ||||
Grant number: | RES-074-27-0018, RES-062-23-1385, SES-0924896 | ||||
Conference Paper Type: | Paper | ||||
Title of Event: | National Bureau of Economic Research Summer Institute 2011 : Income Distribution and Macroeconomics Workshop | ||||
Type of Event: | Conference | ||||
Location of Event: | Cambridge, Massachusetts | ||||
Date(s) of Event: | 19-22 Jul 2011 | ||||
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