Skip to main content
SpringerLink
Log in

Financial Satisfaction from an Intra-Household Perspective

  • Research Paper
  • Published:
Journal of Happiness Studies Aims and scope Submit manuscript

Abstract

We address personal financial satisfaction from an intra-household perspective. Our purpose is twofold. First, we seek to contrast the procedural utility hypothesis, whereby different sources of income may contribute differentially to personal income satisfaction. In particular, we compare labour earnings and non-labour income. Second, we set out to test the hypothesis of relative income within the household. Does the income level of one individual regarding other members of the same household matter in personal income satisfaction? These two hypotheses are relevant to policy-making regarding subsidies, taxation and active labour market programmes. We use data for Spain and Denmark in the European Community Household Panel (ECHP). In general terms, and for both countries, our results seem to confirm both the procedural hypothesis and the relative income hypothesis. Labour income contributes more to individual financial satisfaction than non-labour income for both household partners (men and women) in the two countries. However, the effect of an individual’s own share of labour income relative to the partner’s differs considerably both between men and woman and between the two countries.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Notes

  1. The ECHP does not include specific information on the power relations between couples concerning income matters and consumer decisions, nor is there any information on the actual distribution of consumption.

  2. We use all available waves of the ECHP Survey 2001 was the last year in which the survey was run. Unfortunately, the European survey that replaced it (the Survey on Income and Living Conditions, EU-SILC) does not allow to extend or to replicate this analysis, mainly because it does not include subjective well-being questions.

  3. This selection provides us with a more homogeneous sample of couples and enables us to ignore family members outside the household for whom we do not have any information. Therefore, our couples either do not have children or have young children living with them and no income comes from any other member of the household apart from the couple itself. This selection has to be borne in mind when generalizing our results.

  4. The correlation between these three income variables is low and there is not multicollinearity.

  5. We would have preferred to use a share of total personal income in total household income. Unfortunately, non-labour income in the household cannot be assigned to individuals in this dataset. However, for most households, labour income is the predominant source of personal income, 92 % in Spain and 90 % in Denmark.

  6. The model and the log-likelihood function are described in Frechette (2001).

  7. Marginal effects are also estimated and are available upon request. Marginal effects allow us to compare the magnitudes of the effects of the estimated parameters, so the interpretations of our results in the text are based on the estimated coefficients and the estimated marginal effects.

  8. Note that our empirical specification is different. We interact the proportion that is contributed by the individual (own share of labor income) with the fact that the individual cohabits with his/her partner instead of being married. Else, we use the 8 waves of the ECHP and control for individual heterogeneity, while Bonke and Browning (2009) and Bonke (2008) use the first wave of the panel (1994).

References

  • Alessie, R., Crossley T. F., & Hildebrand V. (2006). Estimating a collective household model with survey data on financial satisfaction, IFS Working Paper WP06/17. Institute of Fiscal Studies, London.

  • Amuedo-Dorantes, C., Bonke, J. & Grossbard, S. (2010). Income pooling and household division of labor: Evidence from Danish couples. IZA Discussion Papers 5418. Institute for the Study of Labor (IZA), Bonn.

  • Appouey, B. & Clark, A. E. (2010). Winning big but feeling no better? The effect of lottery prizes on physical and mental health. IZA Discussion Papers 4730. Institute for the Study of Labor (IZA), Bonn.

  • Apps, P & Rees, R. (2011). Household time use, inequality and taxation, In J. A. Molina (ed.), Household Economic Behaviors, International Series on Consumer Science. doi:10.1007/978-1-4419-9431-8_3.

  • Biswas-Diener, R., Vittersø, J., & Diener, E. (2010). The Danish effect: Beginning to wxplain high well-being in Denmark. Social Indicators Research, 97, 229–246.

    Article  Google Scholar 

  • Bittman, M., England, P., Folbre, N., Sayer, L., & Matheson, G. (2003). When does gender trump money? Bargaining and time in the household work. The American Journal of Sociology, 109, 186–214.

    Article  Google Scholar 

  • Bonke, J. (2008). Income distribution and financial satisfaction between spouses in Europe. The Journal of Socio-Economics, 37, 2291–2303.

    Article  Google Scholar 

  • Bonke, J., & Browning, M. (2009). The distribution of well-being and income within the household. Review of Economics of the Household, 7, 31–42.

    Article  Google Scholar 

  • Broadman, S., Esping-Andersen, G., & Güell, M. (2007). When fertility is bargained. Second births in Denmark and Spain. European Sociological Review, 23(5), 599–613.

    Article  Google Scholar 

  • Camerer, C., Lowenstein, G., & Prelec, D. (2004). Neuroeconomics: Why Economics needs brains. Scandinavian Journal of Economics, 106(3), 555–579.

    Article  Google Scholar 

  • Camerer, C., Lowenstein, G., & Prelec, D. (2005). Neuroeconomics: How neuroscience can inform economics. Journal of Economic Literature, 43(1), 9–64.

    Article  Google Scholar 

  • Clark, A. E. (2011). Income and happiness: Getting the debate straight. Applied Research in Quality of Life, 6(3), 253–263.

    Article  Google Scholar 

  • Clark, A. E., Diener, E., Georgellis, Y., & Lucas, R. E. (2008a). Lags and leads in life satisfaction: A test of the baseline hypothesis. The Economic Journal, 118, 222–243.

    Article  Google Scholar 

  • Clark, A., Frijters, P., & Shields, M. (2008b). Relative income, happiness, and utility: An explanation for the Easterlin Paradox and other puzzles. Journal of Economic Literature, 46(1), 95–144.

    Article  Google Scholar 

  • Clark, A. E., & Senik, C. (2010). Who compares to whom? The anatomy of income comparisons in Europe. The Economic Journal, 120, 573–594.

    Article  Google Scholar 

  • De la Rica, S., & Ugidos, A. (1995). Son las diferencias en capital humano determinantes de las diferencias salariales observadas entre hombre y mujeres? Investigaciones Económicas, XIX(3), 395–414.

    Google Scholar 

  • Di Tella, R., Haisken-De New, J., & MacCulloch, R. (2010). Happiness adaptation to income and to status in an individual panel. Journal of Economic Behavior & Organization, 76, 834–852.

    Article  Google Scholar 

  • Diener, E. (2012). New findings and future directions for Subjective Well-being research. American Psychologist, 67(8), 590–597.

    Article  Google Scholar 

  • Diener, E., & Biswas-Diener, R. (2002). Will money increase subjective well-being? A literature review and guide to needed research. Social Indicators Research, 57, 119–169.

    Article  Google Scholar 

  • Drakopoulos, S. A. (2013). Hierarchical needs, income comparisons, and happiness levels. In Efklides, A. & Moraitou, D. (Ed.), A Positive Perspective on Quality of Life. Social Indicators Research Series 51. Springer Science + Business Media, Dordrecht.

  • Easterlin, R. A. (1974). Does economic growth improve the human lot? In P. A. David & M. W. Reder (Eds.), Nations and households in economic growth: Essays in honor of Moses Abramovitz. New York: Academic Press, Inc.

    Google Scholar 

  • Easterlin, R. A. (1995). Will raising the incomes of all increase the happiness of all? Journal of Economic Behaviour and Organization, 27(1), 35–48.

    Article  Google Scholar 

  • Easterlin, R. A. (2001). Income and happiness: Towards a unified theory. Economic Journal, 111(473), 465–484.

    Article  Google Scholar 

  • Easterlin, R. A. & Sawangfa, O. (2007). Happiness and domain satisfaction: theory and evidence. IZA Discussion Papers 2584. Institute for the Study of Labor (IZA), Bonn.

  • Esping-Andersen, G., Boertien, D., Bonke, J. & Gracia, P. (2013). Couple specialization in multiple equilibria. Mimeo Universitat Pompeu Fabra, Barcelona. (conditionally accepted, European Sociological Review).

  • Esping-Andersen, G., Güell, M. & Broadman, S. (2005). When mothers work and fathers care: joint household fertility decisions in Denmark and Spain. DemoSoc WP 2005-05. Universitat Pompeu Fabra, Barcelona.

  • Esping-Andersen, G., & Wagner, S. (2012). Asymmetries in the opportunity structure. Intergenerational mobility trends in Europe. Research in Social Stratification and Mobility, 30, 473–487.

    Article  Google Scholar 

  • Eurostat (2001, 2002). Imputation of Income in the ECHP. Eurostat Brussels, PAN 164.

  • Ferrer-i-Carbonell, A. (2005). Income and well-being: An empirical analysis of the comparison income effect. Journal of Public Economics, 89(5–6), 997–1019.

    Article  Google Scholar 

  • Ferrer-i-Carbonell, A. (2012). Happiness economics. Forthcoming in SERIES. doi:10.1007/s13209-012-0086-7.

  • Ferrer-i-Carbonell, A., & Frijters, P. (2004). How important is methodology for the estimates of the determinants of happiness? Economic Journal, 114(497), 641–659.

    Article  Google Scholar 

  • Frechette, G. R. (2001). Random-effects ordered probit. Stata Technical Bulletin, 59, 23–27.

    Google Scholar 

  • Frey, B. S., Benz, M. & Stutzer, A. (2003). Introducing procedural utility: Not only what but also how matters. IEW Working Paper No-129. University of Zurich, Zurich.

  • García, I., Molina, J. A., & Navarro, M. (2007). Modelling interdependences between espouses by estimating income satisfaction. Economics Bulletin, 4(10), 1–5.

    Google Scholar 

  • Luttmer, E. F. P. (2005). Neighbours as negatives: Relative earnings and well-being. The Quarterly Journal of Economics, 120(3), 963–1002.

    Google Scholar 

  • McBride, M. (2001). Relative income effects on subjective well-being in the cross-section. Journal of Economic Behaviour and Organization, 45(3), 251–278.

    Article  Google Scholar 

  • Moreno Mínguez, A. ed. (2013). Family Well-Being. European Perspectives. Social Indicators Research Series, Vol 49. Springer Science + Business Media, Dordrecht.

  • Rodriguez, F. & A. Jayadev (2010). The declining labor share of income. Research Paper 2010/36. Human Development Reports. United Nations Development Programme, UN.

  • Rojas, M. (2005). Household arrangements and economic poverty: a subjective well-being approach. Presented in International Conference on The many dimensions of poverty, Brasilia, August 2005.

  • Rojas, M. (2006). Communitarian versus individualistic arrangements in the family: What and whose income matters for happiness? In R. J. Estes (Ed.), Advancing quality of life in a turbulent world. Berlin: Springer.

    Google Scholar 

  • Stutzer, A. (2001). The role of income aspirations in individual happiness. Journal of Economic Behaviour and Organization, 45(3), 89–109.

    Google Scholar 

  • Van Praag, B. M. S., & Ferrer-i-Carbonell, A. (2008). Happiness quantified: A satisfaction calculus approach. Oxford: Oxford University Press.

    Google Scholar 

  • Van Praag, B. M. S., Frijters, P., & Ferrer-i-Carbonell, A. (2003). The anatomy of subjective well-being. Journal of Economic Behaviour and Organization, 51, 29–49.

    Article  Google Scholar 

  • Vera-Toscano, E., Ateca-Amestoy, V., & Serrano-del-Rosal, R. (2006). Building financial satisfaction. Social Indicators Research, 77(2), 211–243.

    Article  Google Scholar 

  • Xiao, J. J. (2013). Family economic well-being. In G. W. Peterson & K. R. Bush (Eds.), Handbook of marriage and the family. New York: Springer Science + Business Media.

    Google Scholar 

Download references

Acknowledgments

We would like to acknowledge the invaluable research assistance of Clara Velásquez and the financial support of Spain’s Ministry of Work and social Affairs (IMSERSO), Ministry of Science and Technology “ECO2012-35820”, the University of Basque Country BETS Unit “UFI11/46” and the Basque Government “IT241-07” and “IT793-13”. All errors are solely ours.

Author information

Authors and Affiliations

  1. Departamento de Economía, University of Cantabria, Avda. de los Castros, s/n, Fac. de CC Económicas y Empresariales, 39005, Santander, Spain

    Namkee Ahn

  2. Fundamentos del Análisis Económico II, University of the Basque Country (UPV/EHU), Avda. Lehendakari Aguirre, 83, 48015, Bilbao, Spain

    Victoria Ateca-Amestoy & Arantza Ugidos

Authors
  1. Namkee Ahn
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Victoria Ateca-Amestoy
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Arantza Ugidos
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Arantza Ugidos.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Ahn, N., Ateca-Amestoy, V. & Ugidos, A. Financial Satisfaction from an Intra-Household Perspective. J Happiness Stud 15, 1109–1123 (2014). https://doi.org/10.1007/s10902-013-9466-3

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10902-013-9466-3

Keywords

Search

Navigation