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Happiness adaptation to high income: Evidence from German panel data

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  • Luo, Jianbo

Abstract

This paper is the first to use national representative panel data to demonstrate that individuals do not adapt to high income in the long run: after five or more years, the life satisfaction of high-income people is still higher than that of the average population. Using entropy balancing (EB) matching and Lasso variable selection to reweight the control group yields similar results.

Suggested Citation

  • Luo, Jianbo, 2021. "Happiness adaptation to high income: Evidence from German panel data," Economics Letters, Elsevier, vol. 206(C).
    • Handle: RePEc:eee:ecolet:v:206:y:2021:i:c:s016517652100272x
    DOI: 10.1016/j.econlet.2021.109995
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    References listed on IDEAS

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    1. Ichino, Andrea & Schwerdt, Guido & Winter-Ebmer, Rudolf & Zweimüller, Josef, 2017. "Too old to work, too young to retire?," The Journal of the Economics of Ageing, Elsevier, vol. 9(C), pages 14-29.
    2. Everding, Jakob & Marcus, Jan, 2020. "The effect of unemployment on the smoking behavior of couples," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 29(2), pages 154-170.
    3. repec:hal:pseose:halshs-01383894 is not listed on IDEAS
    4. Andrew E. Clark & Conchita D’Ambrosio & Simone Ghislandi, 2016. "Adaptation to Poverty in Long-Run Panel Data," The Review of Economics and Statistics, MIT Press, vol. 98(3), pages 591-600, July.
    5. Easterlin, Richard A. & O’Connor, Kelsey J., 2020. "The Easterlin Paradox," GLO Discussion Paper Series 743, Global Labor Organization (GLO).
    6. Andrew E. Clark & Conchita D'Ambrosio & Rong Zhu, 2021. "Living in the Shadow of the Past: Financial Profiles and Well‐Being," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(3), pages 910-939, July.
    7. Ruut Veenhoven & Floris Vergunst, 2014. "The Easterlin illusion: economic growth does go with greater happiness," International Journal of Happiness and Development, Inderscience Enterprises Ltd, vol. 1(4), pages 311-343.
    8. Tania Burchardt, 2005. "Are One Man’s Rags Another Man’s Riches? Identifying Adaptive Expectations using Panel Data," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 74(1), pages 57-102, October.
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    Cited by:

    1. Jianbo Jeff Luo, 2022. "Is Work a Burden? The Role of the Living Standard," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 163(1), pages 61-77, August.
    2. Luo, Jianbo Jeff, 2022. "Occupational licensing and job satisfaction: Evidence from US data," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 101(C).
    3. Jianbo Jeff Luo, 2022. "Is Happiness Adaptation to Poverty Limited? The Role of Reference Income," Journal of Happiness Studies, Springer, vol. 23(6), pages 2491-2516, August.

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    More about this item

    Keywords

    High income; Subjective well-being; Adaptation; Entropy balancing; Machine learning Lasso;
    All these keywords.

    JEL classification:

    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • D1 - Microeconomics - - Household Behavior

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