Happiness Adaptation to Income and to Status in an Individual Panel

39 Pages Posted: 27 Jun 2007 Last revised: 28 Aug 2007

See all articles by Rafael Di Tella

Rafael Di Tella

Harvard Business School - Business, Government and the International Economy Unit; National Bureau of Economic Research (NBER)

John de New

University of Melbourne - Melbourne Institute: Applied Economic & Social Research

Robert MacCulloch

Imperial College London - Tanaka Business School

Multiple version iconThere are 2 versions of this paper

Date Written: June 2007

Abstract

We study "habituation" to income and to status using individual panel data on the happiness of 7,812 people living in Germany from 1984 to 2000. Specifically, we estimate a "happiness equation" defined over several lags of income and status and compare the long run effects. We can (cannot) reject the hypothesis of no adaptation to income (status) during the four years following an income (status) change. In the short-run (current year) a one standard deviation increase in status and 52% of one standard deviation in income are associated with similar increases in happiness. In the long-run (five year average) a one standard deviation increase in status has a similar effect to an increase of 285% of a standard deviation in income. We also present different estimates of habituation across sub-groups. For example, we find that those on the right (left) of the political spectrum adapt to status (income) but not to income (status).

Suggested Citation

Di Tella, Rafael and de New, John and MacCulloch, Robert, Happiness Adaptation to Income and to Status in an Individual Panel (June 2007). NBER Working Paper No. w13159. Available at SSRN: https://ssrn.com/abstract=992162

Rafael Di Tella (Contact Author)

Harvard Business School - Business, Government and the International Economy Unit ( email )

Cambridge, MA
United States
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617-496-5985 (Fax)

HOME PAGE: http://www.people.hbs.edu/rditella/

National Bureau of Economic Research (NBER)

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John De New

University of Melbourne - Melbourne Institute: Applied Economic & Social Research

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Parkville, Victoria 3010
Australia

Robert MacCulloch

Imperial College London - Tanaka Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom

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