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Journal Article

How much does money really matter? Estimating the causal effects of income on happiness

Authors

Publication date

2010

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

Published in

Empirical Economics

Volume

39 (1):77-92

DOI

http://dx.doi.org/10.1007/s00181-009-0295-5

Subjects

Income Dynamics and Well Being

Links

http://serlib0.essex.ac.uk/record=b1597555~S5

Notes

Online in A/S except current year; Originally 'Online First' 25 Apr.2009; Albert Sloman Library Periodicals *restricted to Univ. Essex registered users*

#513406


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