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When Experienced and Decision Utility Concur: The Case of Income Comparisons

28 Pages Posted: 4 Sep 2015  

Andrew Clark

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

Claudia Senik

National Center for Scientific Research - Department and Laboratory of Applied and Theoretical Economics (DELTA); Universite Paris IV Sorbonne; IZA Institute of Labor Economics

Katsunori Yamada

Kindai University, Faculty of Economics; Osaka University - Institute of Social and Economic Research

Abstract

While there is now something of a consensus in the literature on the economics of happiness that income comparisons to others help determine subjective wellbeing, debate continues over the relative importance of own and reference-group income, in particular in research on the Easterlin paradox. The variety of results in this domain have produced some scepticism regarding happiness analysis, and in particular with respect to the measurement of reference-group income. We here use data from an original Internet survey in Japan to compare the results from happiness regressions to those from hypothetical-choice experiments. The trade-off between own and others' income (showing the importance of absolute and relative income) is similar in these two sets of results. This kind of validation of experienced utility via direct comparison with decision utility remains rare in this literature.

Keywords: satisfaction, income comparisons, reference-group income, discrete-choice experiments

JEL Classification: D31, D63, I3, J31

Suggested Citation

Clark, Andrew and Senik, Claudia and Yamada, Katsunori, When Experienced and Decision Utility Concur: The Case of Income Comparisons. IZA Discussion Paper No. 9189. Available at SSRN: https://ssrn.com/abstract=2655138

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

Claudia Senik

National Center for Scientific Research - Department and Laboratory of Applied and Theoretical Economics (DELTA) ( email )

ENS, 48, bd Jourdan
75014 Paris
France
+33 1 4313 6312 (Phone)

Universite Paris IV Sorbonne

Department of Economics
75230 Paris Cedex 05
France
01 43 13 63 12 (Phone)

IZA Institute of Labor Economics

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

Katsunori Yamada

Kindai University, Faculty of Economics ( email )

Higashi-Osaka City, Osaka 577-8502
Japan

HOME PAGE: http://www.eonet.ne.jp/~kyamada/

Osaka University - Institute of Social and Economic Research ( email )

6-1, Mihogaoka
Ibaraki, Osaka 567-0047
Japan

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