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Adaptation to Income over Time: A Weak Point of Subjective Well-Being

19 Pages Posted: 6 Oct 2008  

Christoph Wunder

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg - Department of Economics; University of Bamberg

Date Written: October 2008

Abstract

This article holds the view that intertemporal comparisons of subjective well-being measures are only meaningful when the underlying standards of judgment are unaltered. This is a weak point of such measures. The study investigates the change in the satisfaction judgments resulting from adaptation to income over time. Adaptation is defined to be desensitization (sensitization) to the hedonic effect of income resulting from an upward (downward) adjustment of the standards. A framework is introduced that provides empirical estimates for the rate of adaptation using data from the Socio-Economic Panel Study (SOEP).

Keywords: adaptation, financial satisfaction, subjective well-being, standards of judgment

JEL Classification: C23, I31

Suggested Citation

Wunder, Christoph, Adaptation to Income over Time: A Weak Point of Subjective Well-Being (October 2008). SOEPpaper No. 130. Available at SSRN: https://ssrn.com/abstract=1279423 or http://dx.doi.org/10.2139/ssrn.1279423

Christoph Wunder (Contact Author)

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg - Department of Economics ( email )

Lange Gasse 20
Nuernberg, D-90403
Germany

University of Bamberg ( email )

Feldkirchenstr. 21
Bamberg 96045
Germany

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