Testing the Tunnel Effect: comparison, age and happiness in UK and German panels

Felix R FitzRoy, Michael A. Nolan, Max F. Steinhardt, David Tregear Ulph

    Research output: Working paper

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    Abstract

    In contrast to previous results combining all ages we find positive effects of comparison income on happiness for the under 45s, and negative effects for those over 45. In the BHPS these coefficients are several times the magnitude of own income effects. In GSOEP they cancel to give no effect of effect of comparison income on life satisfaction in the whole sample, when controlling for fixed effects, and time-in-panel, and with flexible, age-group dummies. The residual age-happiness relationship is hump-shaped in all three countries. Results are consistent with a simple life cycle model of relative income under uncertainty.
    Original languageEnglish
    PublisherUniversity of St Andrews
    Number of pages34
    Publication statusPublished - Jun 2013

    Publication series

    NameSchool of Economics & Finance Discussion Paper
    PublisherUniversity of St. Andrews
    No.1304
    ISSN (Print)0962-4031
    ISSN (Electronic)2055-303X

    Keywords

    • subjective life-satisfaction
    • comparison income
    • reference groups
    • age
    • welfare

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