Money and Happiness: Evidence from the Industry Wage Structure

64 Pages Posted: 23 May 2011

See all articles by Jörn-Steffen Pischke

Jörn-Steffen Pischke

London School of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Multiple version iconThere are 3 versions of this paper

Abstract

There is a well-established positive correlation between life-satisfaction measures and income in individual level cross-sectional data. This paper attempts to provide some evidence on whether this correlation reflects causality running from money to happiness. I use industry wage differentials as instruments for income. This is based on the idea that at least part of these differentials are due to rents, and part of the pattern of industry affiliations of individuals is random. To probe the validity of these assumptions, I compare estimates for life satisfaction with those for job satisfaction, present fixed effects estimates, and present estimates for married women using their husbands' industry as the instrument. All these specifications paint a fairly uniform picture across three different data sets. IV estimates are similar to the OLS estimates suggesting that most of the association of income and well-being is causal.

Keywords: life satisfaction, well-being

JEL Classification: D1, J31

Suggested Citation

Pischke, Jörn-Steffen (Steve), Money and Happiness: Evidence from the Industry Wage Structure. IZA Discussion Paper No. 5705, Available at SSRN: https://ssrn.com/abstract=1849460 or http://dx.doi.org/10.2139/ssrn.1849460

Jörn-Steffen (Steve) Pischke (Contact Author)

London School of Economics ( email )

Houghton Street
London WC2A 2AE
+44 207 955 6509 (Phone)
+44 207 955 7595 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

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

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
84
Abstract Views
1,467
Rank
429,384
PlumX Metrics