Publication type
Research Paper
Series Number
09/02
Series
University of York Discussion Papers in Economics
Author
Publication date
June 1, 2009
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. This paper aims to do just that. 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.
Subjects
Link
- http://ideas.repec.org/p/yor/yorken/09-02.html
Notes
discussion paper
#513176