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Income, Relational Goods and Happiness

[journal article]

Becchetti, Leonardo; Trovato, Giovanni; Londono Bedoya, David Andres

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Please use the following Persistent Identifier (PID) to cite this document:http://nbn-resolving.de/urn:nbn:de:0168-ssoar-242465

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Abstract Our empirical analysis on the determinants of self declared happiness on more than 100,000 individuals in 82 world countries does not reject the hypothesis that the time spent for relationships has a significant and positive impact on happiness. This basic nexus helps to understand new unexplored paths in the so called\happiness-income paradox". To illustrate them we show that personal income has two main effects on happiness. The first is a positive effect which depends on individual's ranking within domestic income quintiles. The second is determined by the relationship between income and relational goods. In principle, more productive individuals may substitute worked hours with the nonworking time made free for enjoying relationships, when they have strong preferences for them. The problem is that these individuals tend to have ties with their income class peers who share with them a high opportunity cost for the time spent for relationships. Hence, a coordination failure may reduce the joint investment in relational goods (local public goods which need to be co-produced in order to be enjoyed together) and, through this effect, individuals in the highest income quintiles may end up with poorer relational goods. The indirect impact of personal income on happiness through this channel is therefore expected to be negative.
Classification Basic Research, General Concepts and History of Economics; Applied Psychology
Document language English
Publication Year 2009
Page/Pages p. 273-290
Journal Applied Economics, 43 (2009) 3
DOI http://dx.doi.org/10.1080/00036840802570439
ISSN 1466-4283
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)