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Negative Emotions, Income, and Welfare: Causal Estimates from the PSID

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  • Clingingsmith, David

    (Case Western Reserve University)

Abstract

I use instrumental variables to estimate the causal effect of family income on the frequency with which individuals experience negative emotions. Doubling income reduces the experience of negative emotions by 0.26 SD on average. Percentage changes in income have a constant effect on negative emotion for family incomes below $80,000. Above $80,000, the effect of percentage changes declines, reaching zero at $200,000. A dollar change in family income has an eight times larger effect at the 20th percentile of income than the 80th percentile. Effects of income are similar on the high levels of negative emotion characteristic of mental illness, except there is no satiation.

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  • Clingingsmith, David, 2017. "Negative Emotions, Income, and Welfare: Causal Estimates from the PSID," SocArXiv q2mxt, Center for Open Science.
    • Handle: RePEc:osf:socarx:q2mxt
    DOI: 10.31219/osf.io/q2mxt
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