Money and happiness: Rank of income, not income, affects life satsifaction
(with Gordon Brown and Simon Moore)
Does money buy happiness, or does happiness come indirectly from the higher rank in society that money brings? Here we test a rank hypothesis, according to which people gain utility from the ranked position of their income within a comparison group. The rank hypothesis contrasts with traditional reference income hypotheses, which suggest utility from income depends on comparison to a social group reference norm. We find that the ranked position of an individual’s income predicts general life satisfaction, while absolute income and reference income have no effect. Furthermore, individuals weight upward comparisons more than downward comparisons. According to the rank hypothesis, income and utility are not directly linked: Increasing an individual’s income will only increase their utility if ranked position also increases and will necessarily reduce the utility of others who will lose rank.
Understanding fixed effects in human well-being
In studies of subjective well-being, economists and other researchers typically use a fixed or random effect estimation to control for unobservable heterogeneity across individuals. Such individual heterogeneity, although substantially reducing the estimated effect of many characteristics, is little understood. This paper shows that personality measures can account for 20% of this heterogeneity and a further 13% can be accounted for by other observable between-person information. This paper then demonstrates that the use of personality measures, in a new technique developed by Plumper and Troeger (2007), can help researchers obtain improved estimates for important characteristics such as marital status, disability and income. The paper argues that this has important practical implications.
Do people become healthier after being promoted?
(with Andrew Oswald)
This paper explores the hypothesis that greater job status makes a person healthier. It first replicates the well-known cross-section gradient in health across different levels of job seniority. Then -- following a large sample of randomly selected individuals through time -- it turns to longitudinal patterns. When it does so, the paper can find little evidence that promotees exhibit a health improvement. In the private sector, promotion worsens people’s psychological health (on a standard GHQ mental-strain measure). The data suggest that it is people who start with good health who are promoted.