[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_4008.html
   My bibliography  Save this paper

Estimating the Influence of Life Satisfaction and Positive Affect on Later Income Using Sibling Fixed-Effects

Author

Listed:
  • Jan-Emmanuel De Neve
  • Andrew J. Oswald
Abstract
The question of whether there is a connection between income and psychological well-being is a long-studied issue across the social, psychological, and behavioral sciences. Much research has found that richer people tend to be happier. However, relatively little attention has been paid to whether happier individuals perform better financially in the first place. This possibility of reverse causality is arguably understudied. Using data from a large US representative panel we show that adolescents and young adults who report higher life satisfaction or positive affect grow up to earn significantly higher levels of income later in life. We focus on earnings approximately one decade after the person’s well-being is measured; we exploit the availability of sibling clusters to introduce family fixed-effects; we account for the human capacity to imagine later socio-economic outcomes and to anticipate the resulting feelings in current wellbeing. The study’s results are robust to the inclusion of controls such as education, IQ, physical health, height, self-esteem, and later happiness. We consider how psychological well-being may influence income. Sobel-Goodman mediation tests reveal direct and indirect effects that carry the influence from happiness to income. Significant mediating pathways include a higher probability of obtaining a college degree, getting hired and promoted, having higher degrees of optimism and extraversion, and less neuroticism.

Suggested Citation

  • Jan-Emmanuel De Neve & Andrew J. Oswald, 2012. "Estimating the Influence of Life Satisfaction and Positive Affect on Later Income Using Sibling Fixed-Effects," CESifo Working Paper Series 4008, CESifo.
    • Handle: RePEc:ces:ceswps:_4008
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo1_wp4008.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Andrew J. Oswald & Eugenio Proto & Daniel Sgroi, 2015. "Happiness and Productivity," Journal of Labor Economics, University of Chicago Press, vol. 33(4), pages 789-822.
    2. Ed Diener & Robert Biswas-Diener, 2002. "Will Money Increase Subjective Well-Being?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 57(2), pages 119-169, February.
    3. Guven, Cahit, 2012. "Reversing the question: Does happiness affect consumption and savings behavior?," Journal of Economic Psychology, Elsevier, vol. 33(4), pages 701-717.
    4. Layard, R. & Mayraz, G. & Nickell, S., 2008. "The marginal utility of income," Journal of Public Economics, Elsevier, vol. 92(8-9), pages 1846-1857, August.
    5. Clark, Andrew E. & Oswald, Andrew J., 1996. "Satisfaction and comparison income," Journal of Public Economics, Elsevier, vol. 61(3), pages 359-381, September.
    6. Robert J. B. Goudie & Sach Mukherjee & Jan-Emmanuel De Neve & Andrew J. Oswald & Stephen Wu, 2011. "Happiness as a Driver of Risk-Avoiding Behavior," CESifo Working Paper Series 3451, CESifo.
    7. Loewenstein, George, 1987. "Anticipation and the Valuation of Delayed Consumption," Economic Journal, Royal Economic Society, vol. 97(387), pages 666-684, September.
    8. Erzo F. P. Luttmer, 2005. "Neighbors as Negatives: Relative Earnings and Well-Being," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(3), pages 963-1002.
    9. Gardner, Jonathan & Oswald, Andrew J., 2007. "Money and mental wellbeing: A longitudinal study of medium-sized lottery wins," Journal of Health Economics, Elsevier, vol. 26(1), pages 49-60, January.
    10. Ed Diener & Carol Nickerson & Richard Lucas & Ed Sandvik, 2002. "Dispositional Affect and Job Outcomes," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 59(3), pages 229-259, September.
    11. Sonja Lyubomirsky & Chris Tkach & M. DiMatteo, 2006. "What are the Differences between Happiness and Self-Esteem," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 78(3), pages 363-404, September.
    12. Glen R. Waddell, 2006. "Labor-Market Consequences of Poor Attitude and Low Self-Esteem in Youth," Economic Inquiry, Western Economic Association International, vol. 44(1), pages 69-97, January.
    13. Graham, Carol & Eggers, Andrew & Sukhtankar, Sandip, 2004. "Does happiness pay?: An exploration based on panel data from Russia," Journal of Economic Behavior & Organization, Elsevier, vol. 55(3), pages 319-342, November.
    14. Arthur A. Stone & Joseph E. Schwartz & Joan E. Broderick & Angus Deaton, 2010. "A snapshot of the age distribution of psychological well-being in the United States," Working Papers 1230, Princeton University, Woodrow Wilson School of Public and International Affairs, Center for Health and Wellbeing..
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Krause, Annabelle, 2013. "Don’t worry, be happy? Happiness and reemployment," Journal of Economic Behavior & Organization, Elsevier, vol. 96(C), pages 1-20.
    2. O'Donnell, Gus & Oswald, Andrew J., 2015. "National well-being policy and a weighted approach to human feelings," Ecological Economics, Elsevier, vol. 120(C), pages 59-70.
    3. De Neve, Jan-Emmanuel & Diener, Ed & Tay, Louis & Xuereb, Cody, 2013. "The objective benefits of subjective well-being," LSE Research Online Documents on Economics 51669, London School of Economics and Political Science, LSE Library.
    4. Nattavudh Powdthavee, 2010. "How much does money really matter? Estimating the causal effects of income on happiness," Empirical Economics, Springer, vol. 39(1), pages 77-92, August.
    5. Nattavudh Powdthavee, 2009. "Estimating the Causal Effects of Income on Happiness," Discussion Papers 09/02, Department of Economics, University of York.
    6. Marcin Piekałkiewicz, 2017. "Why do economists study happiness?," The Economic and Labour Relations Review, , vol. 28(3), pages 361-377, September.
    7. Andrew E. Clark, 2018. "Four Decades of the Economics of Happiness: Where Next?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 64(2), pages 245-269, June.
    8. Di Tella, Rafael & Haisken-De New, John & MacCulloch, Robert, 2010. "Happiness adaptation to income and to status in an individual panel," Journal of Economic Behavior & Organization, Elsevier, vol. 76(3), pages 834-852, December.
    9. Warn N. Lekfuangfu & Nattavudh Powdthavee & Mark Wooden, 2013. "The Marginal Income Effect of Education on Happiness: Estimating the Direct and Indirect Effects of Compulsory Schooling on Well-Being in Australia," CEP Discussion Papers dp1214, Centre for Economic Performance, LSE.
    10. Diriwaechter, Patric & Shvartsman, Elena, 2018. "The anticipation and adaptation effects of intra- and interpersonal wage changes on job satisfaction," Journal of Economic Behavior & Organization, Elsevier, vol. 146(C), pages 116-140.
    11. Montizaan, Raymond M. & Vendrik, Maarten C.M., 2014. "Misery Loves Company: Exogenous shocks in retirement expectations and social comparison effects on subjective well-being," Journal of Economic Behavior & Organization, Elsevier, vol. 97(C), pages 1-26.
    12. Pischke, Jorn-Steffen, 2011. "Money and Happiness: Evidence from the Industry Wage Structure," CEPR Discussion Papers 8409, C.E.P.R. Discussion Papers.
    13. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2006. "Income and happiness: Evidence, explanations and economic implications," PSE Working Papers halshs-00590436, HAL.
    14. Bryson, Alex & Barth, Erling & Dale-Olsen, Harald, 2012. "Do higher wages come at a price?," Journal of Economic Psychology, Elsevier, vol. 33(1), pages 251-263.
    15. Ada Ferrer-i-Carbonell, 2013. "Happiness economics," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 4(1), pages 35-60, March.
    16. Prati, Alberto, 2017. "Hedonic recall bias. Why you should not ask people how much they earn," Journal of Economic Behavior & Organization, Elsevier, vol. 143(C), pages 78-97.
    17. Eugenio Proto & Aldo Rustichini, 2013. "A Reassessment of the Relationship between GDP and Life Satisfaction," PLOS ONE, Public Library of Science, vol. 8(11), pages 1-10, November.
    18. Bartolini, Stefano & O’Connor, Kelsey J., 2022. "Effects of teaching practices on life satisfaction and test scores: evidence from the Program for International Student Assessment (PISA)," GLO Discussion Paper Series 1009, Global Labor Organization (GLO).
    19. Bahadır Dursun & Resul Cesur, 2016. "Transforming lives: the impact of compulsory schooling on hope and happiness," Journal of Population Economics, Springer;European Society for Population Economics, vol. 29(3), pages 911-956, July.
    20. Silvia Emili & Federica Galli, 2022. "Self-perceptions and perceptions of peers: their role in understanding expenditure behaviours," Quality & Quantity: International Journal of Methodology, Springer, vol. 56(6), pages 4573-4597, December.

    More about this item

    Keywords

    income; life satisfaction; positive affect;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D60 - Microeconomics - - Welfare Economics - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_4008. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.