Social Indicators Research

, 95:111 | Cite as

The Effect of Income on General Life Satisfaction and Dissatisfaction

Article

Abstract

Increasing evidence from the empirical economic and psychological literature suggests that positive and negative well-being are more than opposite ends of the same phenomenon. Two separate measures of the dependent variable may therefore be needed when analyzing the determinants of subjective well-being. We investigate asymmetries in the effect of income on subjective well-being with a single-item measure of general life satisfaction. Using data from the German Socio-Economic Panel 1984–2004, and a flexible multiple-index ordered probit panel data model with varying thresholds, we find that income has only a minor effect on high satisfaction but significantly reduces dissatisfaction.

Keywords

Generalized ordered probit model Marginal probability effects Random effects Fixed effects Life-satisfaction 

Notes

Acknowledgements

We thank four anonymous referees, conference and seminar participants in Basel, Neuchâtel, Zurich, Lausanne, Geneva, Nottingham, Bonn, and Berlin for valuable comments. This is a substantially revised version of IZA Discussion Paper No. 1175 “Income and Happiness: New Results from Generalized Threshold and Sequential Models".

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Copyright information

© Springer Science+Business Media B.V. 2009

Authors and Affiliations

  1. 1.Socioeconomic InstituteUniversity of ZurichZurichSwitzerland

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