Are Americans Really Less Happy with Their Incomes?

38 Pages Posted: 27 Jun 2011

See all articles by Arie Kapteyn

Arie Kapteyn

Dornsife Center for Economic and Social Research - University of Southern California; IZA Institute of Labor Economics; National Bureau of Economic Research (NBER)

James P. Smith

RAND Corporation; IZA Institute of Labor Economics

Arthur van Soest

Tilburg University; Netspar; RAND Corporation; Institute for the Study of Labor (IZA)

Multiple version iconThere are 2 versions of this paper

Date Written: May 24, 2011

Abstract

Recent economic research on international comparisons of subjective well-being suffers from several important biases due to the potential incomparability of response scales within and across countries. In this paper the authors concentrate on self-reported satisfaction with income in two countries: The Netherlands and the U.S. The comparability problem is addressed by using anchoring vignettes. They find that in the raw data, Americans appear decidedly less satisfied with their income than the Dutch. It turns out however that after response scale adjustment based on vignettes the distribution of satisfaction in the two countries is essentially identical. In addition, they find that the within-country cross-sectional effect of income on satisfaction- a key parameter in the recent debate in the economic literature- is significantly under-estimated especially in the US- when differences in response scales are not taken into account.

Keywords: happiness, life satisfaction, vignettes, reporting bias

JEL Classification: I30, J30

Suggested Citation

Kapteyn, Arie and Smith, James P. and van Soest, Arthur H. O. and van Soest, Arthur H. O., Are Americans Really Less Happy with Their Incomes? (May 24, 2011). RAND Working Paper Series WR- 858, Available at SSRN: https://ssrn.com/abstract=1872028 or http://dx.doi.org/10.2139/ssrn.1872028

Arie Kapteyn (Contact Author)

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Arthur H. O. van Soest

Tilburg University ( email )

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