Economic Satisfaction and Income Rank in Small Neighbourhoods

14 Pages Posted: 11 Nov 2008

See all articles by Andrew Clark

Andrew Clark

Paris School of Economics (PSE); IZA Institute of Labor Economics

Nicolai Kristensen

Aarhus School of Business

Niels Westergaard-Nielsen

Copenhagen Business School; IZA Institute of Labor Economics

Abstract

We contribute to the literature on well-being and comparisons by appealing to new Danish data dividing the country up into around 9,000 small neighbourhoods. Administrative data provides us with the income of every person in each of these neighbourhoods. This income information is matched to demographic and economic satisfaction variables from eight years of Danish ECHP data. Panel regression analysis shows that, conditional on own household income, respondents report higher satisfaction levels when their neighbours are richer. However, individuals are rank-sensitive: conditional on own income and neighbourhood median income, respondents are more satisfied as their percentile neighbourhood ranking improves. A ten percentage point rise in rank (i.e. from 40th to 20th position in a 200-household cell) is worth 0.11 on a one to six scale, which is a large marginal effect in satisfaction terms.

Keywords: satisfaction, neighbours, income comparisons, geo-coded data

JEL Classification: C23, C25, D84, J28, J31, J33

Suggested Citation

Clark, Andrew Eric and Kristensen, Nicolai and Westergaard-Nielsen, Niels, Economic Satisfaction and Income Rank in Small Neighbourhoods. IZA Discussion Paper No. 3813. Available at SSRN: https://ssrn.com/abstract=1298256 or http://dx.doi.org/10.1111/j.0042-7092.2007.00700.x

Andrew Eric Clark (Contact Author)

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Nicolai Kristensen

Aarhus School of Business ( email )

Haslegaardsvej 10
DK-8210 Aarhus, 8210
Denmark

Niels Westergaard-Nielsen

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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