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  • December 2010
  • Article
  • Journal of Economic Behavior & Organization

Happiness Adaptation to Income and to Status in an Individual Panel

By: Rafael Di Tella and Robert MacCulloch
  • Format:Print
  • | Pages:19
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Abstract

We study adaptation to income and to status using individual panel data on the happiness of 7,812 people living in Germany from 1984 to 2000. Specifically, we estimate a "happiness equation" defined over several lags of income and status and compare the long-run effects. We can (cannot) reject the hypothesis of no adaptation to income (status) during the four years following an income (status) change. In the short run (current year) a one standard deviation increase in status and 52% of one standard deviation in income are associated with similar increases in happiness. In the long run (five-year average) a one standard deviation increase in status has a similar effect to an increase of 285% of a standard deviation in income. We also present different estimates of adaptation across subgroups. For example, we find that those on the right (left) of the political spectrum adapt to status (income) but not to income (status). We can reject equal relative adaptation (to income versus status) for these two subgroups.

Keywords

Wages; Status and Position; Happiness; Income; Change; Germany

Citation

Di Tella, Rafael, and Robert MacCulloch. "Happiness Adaptation to Income and to Status in an Individual Panel." Journal of Economic Behavior & Organization 76, no. 3 (December 2010): 834–852.
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About The Author

Rafael M. Di Tella

Business, Government and the International Economy
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  • Does Social Media Cause Polarization? Evidence from Access to Twitter Echo Chambers during the 2019 Argentine Presidential Debate By: Rafael Di Tella, Ramiro H. Gálvez and Ernesto Schargrodsky
  • The 2012 Spanish Labor Reform: Lifting All Boats or Levelling Down? By: Vincent Pons, Rafael Di Tella, Santiago Botella and Elena Corsi
  • The Trouble with TCE By: Vincent Pons, Rafael Di Tella and Galit Goldstein
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