Revisiting Cheerful Jane and Miserable John: the impact of income,good health,social contacts and education declines with increasing subjective well-being

This short note seeks to replicate the quantile regression analysis in Binder and Coad (2011), but taking into account individual-specific fixed effects (FE; using the British Household Panel Survey data set). It finds declining effects of the four main variables of interest (health, social life, income, education) over the quantiles of the subjective well-being distribution, with attenuated effect sizes for the FE model. Equivalized log income has a negative impact on subjective well-being throughout the distribution. Apart from a number of robustness checks, existing research is extended by looking into the quantile effects of the above variables on a set of domain satisfactions.     

On the determinants of happiness: a classification and regression tree (CART) approach

This article studies the determinants of the individual’s subjective well-being by applying a classification and regression tree (CART) analysis to data from the Survey on Household Income and Wealth (SHIW) provided by the Bank of Italy. The results support the primary importance of economic conditions but show that their effect is heterogeneously dependent on other individual characteristics.     

Welfare effects of the euro cash changeover

Using merged data from the British Household Panel Survey (BHPS) and the German Socio-Economic Panel (SOEP), this paper applies a parametric difference-in-differences approach to assess the real effects of the introduction of the euro on subjective well-being. A complementary nonparametric approach is also used to analyze the impact of difficulties with the new currency on well-being. The results indicate a loss in well-being associated with the introduction of the new currency, with the predicted probability that a person is contented with his/her household income diminishing by 9.7 percentage points. We calculate a compensating income variation of approximately one-third. That is, an increase in post-government household income of more than 30% is needed to compensate for the clear decline in well-being. The reasons for the negative impact are threefold. First, perceived inflation overestimates the real increase in prices resulting in suboptimal consumption decisions. Second, money illusion causes a false assessment of the budget constraint. Third, individuals have to bear the costs from the conversion and the adjustment to the new currency. Moreover, it is thought that losses are higher for persons who have difficulties with the new currency. However, the impact of difficulties in using and converting the new currency is rather small, and the initial problems were overcome within one year of the introduction of euro cash.     

Income comparison,gender roles and life satisfaction

This article uses data from the German Socio-Economic Panel to analyse the effect of within household income comparison on individual life satisfaction. Our within couple and individual fixed-effects panel estimates suggest that gender roles influence subjective well-being (SWB). A primary breadwinner wife decreases a couple’s individual happiness by eight per cent. The article adds to the findings on interdependence of SWB and hints at negative consequences of traditional gender identity norms for individual happiness.     

Are happiness and productivity lower among young people with newly-divorced parents? An experimental and econometric approach

High rates of divorce in western society have prompted much research on the repercussions for well-being and the economy. Yet little is known about the important topic of whether parental divorce has deleterious consequences upon adult children. By combining experimental and econometric survey-based evidence, this study attempts to provide an answer. Under controlled conditions, it measures university students’ subjective well-being and productivity (in a standardized laboratory task). It finds no evidence that either of these is negatively associated with recent parental divorce. If anything, happiness and productivity appear to be slightly greater, particularly among males, if their parents have divorced. Using longitudinal data from the British Household Panel Survey—to control for so-called fixed effects—we then cross-check this result, and confirm the same finding, on various random samples of young British adults.     

Inequality and Wealth: Comparing the Gender Wealth Gap in Switzerland and Australia

ABSTRACT

Although the gender gap in incomes has been extensively researched, scant attention has been paid to the gender wealth gap. This paper compares the gender wealth gap in Australia with that of Switzerland. Using data from the 2010 Household, Income, and Labour Dynamics in Australia (HILDA) and the 2012 Swiss Household Panel (SHP), this study attributes the gender wealth gap to differences in permanent income and education. Furthermore, the gender wealth gap is much larger in Switzerland than in Australia. The study links this finding to the type of wealth held by individuals in these two countries. Differences in wealth accumulation among women in Switzerland and Australia are likely to be linked to the housing market and to family policies for (single) mothers.     

CONFRONTING OBJECTIONS TO PERFORMANCE PAY: THE IMPACT OF INDIVIDUAL AND GAIN-SHARING INCENTIVES ON JOB SATISFACTION

The increasing use of incentive pay schemes in recent years has raised concerns about their potential detrimental effect on intrinsic job satisfaction (JS), job security and employee morale. This study explores the impact of pay incentives on the overall JS of workers in the United Kingdom and their satisfaction with various facets of jobs. Using data from eight waves (1998–2005) of the British Household Panel Survey (BHPS) and a uniquely designed well-being dataset (EPICURUS), a significant positive impact on JS is only found for those receiving fixed-period bonuses. These conclusions are robust to unobserved heterogeneity, and are shown to depend on a number of job-quality characteristics that have not been controlled for in previous studies.     

Using Panel Data on Income Satisfaction to Estimate Equivalence Scale Elasticity

In this paper, the equivalence scale elasticity will be estimated by using individual panel data on income satisfaction from the German Socio-Economic Panel Study (GSOEP). Satisfaction or happiness data have been more frequently used by economists in recent years to analyze individual well-being. The approach differs from other subjective approaches as respondents are requested to evaluate current income rather than income in hypothetical situations. The estimated scale elasticity is higher compared to those from other subjective approaches based on German data. In addition, panel data enable different scale use by the respondents to be controlled. It can be shown that elasticity decreases when unobserved fixed-effects are controlled for.     

Changes in subjective well-being with retirement: assessing savings adequacy

Does retirement represent a state of relative prosperity or unanticipated hardship? To assess whether individuals are successful in smoothing their well-being across the transition to retirement we analyse measures of subjective well-being (SWB) in the Household, Income and Labour Dynamics in Australia (HILDA) Survey. Specifically, this research examines retirees’ current standard of living, financial security and overall happiness relative to their pre-retirement levels. It is found SWB either improves or remains constant for the large majority of individuals as they retire from the labour force. However, there are significant disparities in changes in well-being with retirement among the group of retirees. In particular, the subset of individuals who are forced to retire early due to job loss or their own health, and who find their income in retirement to be much less than expected, report marked declines in their SWB with retirement.     

Is perceived financial inadequacy persistent?

In an attempt to understand the determinants of financial inadequacy, this paper employs the ability of households to make ends meet as a measure of their perceived financial inadequacy. Using household‐level data from the European Community Household Panel covering eight countries over the period from 1994 to 2001, this study applies a dynamic probit model that incorporates both state dependency and individual fixed effects. Exploiting a latterly enhanced bias‐corrected fixed‐effects probit model, I address the persistent nature of subjective financial inadequacy by directly estimating fixed effects while correcting for incidental parameters and avoiding the initial conditions problem of dynamic models. The results reveal that employing time‐invariant individual effects to model subjective monetary perception is essential. However, by controlling for household heterogeneity, income, indebtedness, and health status, I find that in addition to the major differences across European households, country‐specific factors can have adverse effects on the persistent nature of perceived financial inadequacy.     

If not only GDP,what else? Using relational goods to predict the trends of subjective well-being

In the last decade, a lively interdisciplinary discussion has grown around the evidence that, in the long-run, people’s subjective well-being is not significantly correlated with income growth. In other words, GDP growth does not predict the long run growth of subjective well-being. In this paper, we argue that there exists a different predictor of subjective well-being that works pretty well: sociability, i.e. the quality and quantity of social relationships (also referred to as relational goods). More precisely, we illustrate the role of sociability as a predictor of well-being, presenting the available evidence at both the within-country and the worldwide level. In particular, we discuss recent evidence from US cross-sectional data (General Social Survey, 1975–2004), cross-country time series (World Value Survey 1980–2005), and German panel data (German Socio-Economic Panel, 1996–2007). We conclude by indicating the most relevant open issues and suggesting future lines of research.     

THE TIME LAG IN ANNUAL HOUSEHOLD-BASED INCOME MEASURES: ASSESSING AND CORRECTING THE BIAS

Annual income data are typically provided with a time lag. This article reviews several ways of dealing with this time lag in the construction of annual household-based income measures for individual economic well-being. It also proposes an alternative method that yields better estimates for equivalized household income, especially in the case of household composition change. Next, the two most commonly applied income measures are compared to this alternative measure with empirical income data from the European Community Household Panel. This comparison reveals that ignoring the time lag and household changes leads to substantial bias in income and poverty estimates and to erroneous conclusions about the determinants of poverty entry. The evidence in this article will be useful to researchers who want to make a well-informed choice between different annual income measures.     

When income differences hurt or excite: The nonlinear effect of regional inequality on subjective wellbeing

Combining information from the European Union Statistics on Income and Living Conditions and the European Social Survey, we investigate the relationship between subjective well-being and income inequality using regional inequality indicators and individual data. We assume that inequality aversion and perception of social mobility affect the impact of regional inequality on subjective well-being in opposite directions. We find evidence of an inverse U-shaped effect of inequality, where inequality starts to have a positive effect on subjective well-being that becomes negative with a switch point before the average of the Gini index for the entire sample. The rationale for our nonlinear finding is that Hirschman's tunnel effect (and the positive effect of perceived social mobility) prevails for low levels of inequality, while inequality aversion and negative relative income effects are relatively stronger when inequality is higher. Robustness checks on different sample splits are consistent with the hypothesis of the two drivers.     

The impact of health on wages: Evidence from the British Household Panel Survey

While income is generally considered an important determinant of health, little evidence has been offered on the reverse relationship, particularly for developed economies. This paper considers the effect of self-assessed general and psychological health on hourly wages using longitudinal data from six waves of the British Household Panel Survey. We employ single equation fixed effects and random effects instrumental variable estimators suggested by Hausman and Taylor (1981), Amemiya and MaCurdy (1986), and Breusch, Mizon and Schmidt (1989). Our results show that reduced psychological health reduces the hourly wage for males, while excellent self-assessed health increases the hourly wage for females. We also find the health variables to be positively correlated with the time-invariant individual effect. Further, we confirm the findings of previous work which suggested that the majority of the efficiency gains from the use of the instrumental variables estimators fall on the time-invariant endogenous variables, in our case academic attainment, and add further support to the hypothesis of a negative correlation between educational attainment and individual characteristics which affect wages. First version received: January 2000/Final version received: October 2000     

Imputed Rent and Income Inequality: A Decomposition Analysis for Great Britain, West Germany and the U.S.

This article deals with income advantages derived from owner-occupied housing and their impact on the personal income distribution. Using micro-data from the British Household Panel Study (BHPS), the German Socio-Economic Panel (SOEP), and the U.S. Panel Study of Income Dynamics (PSID) we find distinct cross-national differences in terms of the prevalence and extent of imputed rent. Results from inequality decomposition analyses show this overall impact to be the net effect of two conflicting changes: On the one hand there is increasing income inequality between the groups of owneroccupiers and renters, respectively, and, on the other hand, we find inequality to be decreasing within the group of those owner-occupiers who own outright. When focussing on imputed rent as a means of old-age provision, our results for all three countries show an income advantage for, as well as a poverty reducing effect among the elderly. The empirical findings support the claim for the need of an improved harmonization of this non-cash income component especially for the purpose of cross-national comparative research.     

Tied Down Or Room To Move? Investigating The Relationships Between Housing Tenure,Employment Status And Residential Mobility In Britain

Using data from the British Household Panel Survey, we investigate the relationships between labour market dynamics, housing tenure and residential mobility. Panel data allow the study of the sequence of household moves and individual labour market status changes, enabling unique analysis of the relationship between job and residential mobility. Our findings suggest that the unemployed are more likely to move than employees. A desire to move motivated by employment reasons has the single largest positive impact on the probability of moving between regions.     

Decomposing Vulnerability to Poverty

This paper applies the decomposition of the Foster–Greer–Thorbecke poverty index to the measurement of individual vulnerability to poverty. I highlight that poverty risk can be expressed as a function of expected incidence, expected intensity, and expected variability below the poverty line, three essential aspects for improving the design of appropriate risk‐management policies. An empirical illustration is provided using the British Household Panel Survey and the Italian Survey on Household Income and Wealth.     

Job displacement and the transitions to re-employment and early retirement for non-employed older workers

Despite the relatively higher frequency of job displacement among older workers in Europe, little is known about its effect on the work-retirement decision. Employing individual data from the European Community Household Panel for a number of countries with differences in their institutional environments, the effect of job displacement for non-employed workers is identified separately for the transitions into re-employment and retirement. The findings suggest that in countries with relatively more generous unemployment insurance provisions for the older unemployed, which offer a pathway to early retirement, older displaced workers exhibit lower re-employment and higher retirement rates compared to the non-displaced. These results are robust to dynamic selection due to unobserved heterogeneity and to the endogeneity of displacement.     

Does new health information affect health behaviour? The effect of health events on smoking cessation

This article empirically assesses the role of new health information in the decision to quit smoking. Using individual level data from the Swiss Household Panel, health information is proxied by three different types of health events: physical health problems, mental disorders, and accidents. Exploiting retrospectively reported information on smoking behaviour, smoking cessation is modelled using a discrete time hazard model that also accounts for estimation problems arising from almost quasi-complete separation in the data. The empirical results yield robust evidence that general health problems increase the probability of instantaneous smoking cessation. Differentiating between the type of health event reveals that the overall effect is mainly driven by physical health events.     

The Social Connectedness and Life Satisfaction Nexus: A Panel Data Analysis of Women in Australia

This study explores the interplay between time pressures at home and at work, social connectedness, and well-being as reported by Australian women. Specifically, taking advantage of longitudinal data (from the Household, Income, and Labour Dynamics in Australia survey for the years 2001 to 2013) and employing the newly developed “blow up and cluster” estimation technique, this study finds there has been a marginal decline in the life satisfaction of Australian women. After accounting for changes in sociodemographic characteristics, a more pervasive negative trend in life satisfaction appears to be reported by both men and women, and both genders report higher levels of life satisfaction for greater levels of almost all measures of social connectedness. This study adds to a growing body of evidence pointing toward the importance of frequent and meaningful social connections to societal well-being, as well as the need to refocus attention on well-being in public-policy spheres.