Journal of Population Economics

, Volume 22, Issue 4, pp 1063–1080 | Cite as

Happiness functions with preference interdependence and heterogeneity: the case of altruism within the family

Original Paper

Abstract

This study investigates the prevalence and extent of altruism by examining the relationship between parents’ and their adult children’s subjective well-being in a data set extracted from the German Socio-Economic Panel. To segregate the share of parents with altruistic preferences from those who are selfish, we estimate a finite mixture regression model. We control for various sources of potential bias by taking advantage of the data’s panel structure. To validate our modeling approach, we show that predicted altruists indeed make higher average transfer payments.

Keywords

Altruism Subjective well-being Finite mixture regression models 

JEL Classification

C23 D64 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Andreoni J, Miller J (2002) Giving according to GARP: an experimental test of the rationality of altruism. Econometrica 70(2):737–753CrossRefGoogle Scholar
  2. Barro R (1974) Are government bonds net wealth? J Polit Econ 82(6):1095–1117CrossRefGoogle Scholar
  3. Becker G (1981) Altruism in the family and selfishness in the market place. Economica 48(189):1–15CrossRefGoogle Scholar
  4. Bertola G, Foellmi R, Zweimueller J (2006) Income distribution in macroeconomic models. Princeton University Press, PrincetonGoogle Scholar
  5. Boes S, Winkelmann R (2006) Ordered response models. Allg Stat Arch 90(1):165–180Google Scholar
  6. Broyden C (1970) The convergence of a class of double-rank minimization algorithms. IMA J Appl Math 6(1):76–90CrossRefGoogle Scholar
  7. Celeux G, Chauveau D, Diebolt J (1996) Stochastic versions of the EM algorithm: an experimental study in the mixture case. J Stat Comput Simul 55(4):287–314CrossRefGoogle Scholar
  8. Clark A, Oswald A (1994) Unhappiness and unemployment. Econ J 104(424):648–659CrossRefGoogle Scholar
  9. Clark A, Etile F, Postel-Vinay F, Senik C, Van der Straeten K (2005) Heterogeneity in reported well-being: evidence from twelve European countries. Econ J 115(502):C118–C132CrossRefGoogle Scholar
  10. Clark A, Frijters P, Shields M (2006) Income and happiness: evidence, explanations and economic implications. PSE Working Paper 24, ParisGoogle Scholar
  11. Dempster A, Laird N (1977) Maximum likelihood from incomplete data via the EM algorithm (with discussion). J R Stat Soc 39(1):1–38Google Scholar
  12. Di Tella R, MacCulloch R (2006) Some uses of happiness data in economics. J Econ Perspect 20(1):25–46CrossRefGoogle Scholar
  13. Fehr E, Fischbacher U (2002) Why social preferences matter—the impact of non-selfish motives on competition, cooperation and incentives. Econ J 112(478):C1–C33CrossRefGoogle Scholar
  14. Fehr E, Schmidt K (2002) Theories of fairness and reciprocity—evidence and economic applications. In: Advances in economics and econometrics—8th world congress, economic society monographs. Cambridge University Press, CambridgeGoogle Scholar
  15. Frey B, Stutzer A (2001) Happiness and economics: how the economy and institutions affect human well-being. Princeton University Press, PrincetonGoogle Scholar
  16. Frey B, Stutzer A (2002) What can economists learn from happiness research? J Econ Lit 40(2):402–435CrossRefGoogle Scholar
  17. Laferrere A, Wolff F (2006) Microeconomic models of family transfers. In: Kolm S, Ythier JM (ed) Handbook on the economics of giving, altruism and reciprocity, vol 2. North-Holland, AmsterdamGoogle Scholar
  18. Layard R (2005) Happiness: lessons from a new science. Penguin, LondonGoogle Scholar
  19. McKelvey R, Zavoina W (1975) A statistical model for the analysis of ordinal level dependent variables. J Math Soc 4:103–120Google Scholar
  20. McLachlan G, Peel D (2000) Finite mixture models. Wiley series in probabilities and statistics. Wiley, New YorkGoogle Scholar
  21. Mundlak Y (1978) On the pooling of time series and cross section data. Econometrica 46(1):69–85CrossRefGoogle Scholar
  22. Phelps C (2001) A clue to the paradox of happiness. J Econ Behav Organ 45(3):293–300CrossRefGoogle Scholar
  23. R Development Core Team (2005) R: a language and environment for statistical computing. R Foundation for Statistical Computing, Vienna. http://www.R-project.org
  24. Render R, Walker H (1984) Mixture densities, maximum likelihood and the EM algorithm. SIAM Rev 26(2):195–239CrossRefGoogle Scholar
  25. Rivers D, Vuong Q (1988) Limited information estimators and exogeneity tests for simultaneous probit models. J Econom 39(3):347–366CrossRefGoogle Scholar
  26. Schwarze J, Winkelmann R (2005) What can happiness research tell us about altruism? Evidence from the German Socio-Economic Panel. SOI Working Paper 0503, ZurichGoogle Scholar
  27. Terza J (1987) Estimating linear models with ordinal qualitative regressors. J Econom 34(3):275–291CrossRefGoogle Scholar
  28. Wagner G, Burkhauser R, Behringer F (1993) The english language public use file of the German socio-economic panel. J Hum Resour 28(2):429–433Google Scholar
  29. Winkelmann R (2005) Subjective well-being and the family: results from an ordered probit model with multiple random effects. Empir Econ 30(3):749–761CrossRefGoogle Scholar

Copyright information

© Springer-Verlag 2008

Authors and Affiliations

  1. 1.University of Zurich, Socioeconomic InstituteZurichSwitzerland

Personalised recommendations