Income and Life Satisfaction

Proc Natl Acad Sci U S A. 2010 Sep 21;107(38):16489-16493.

High income improves evaluation of life but not emotional well-being

Kahneman D, Deaton A.

Center for Health and Well-being, Princeton University, Princeton, NJ 08544.

Abstract

Recent research has begun to distinguish two aspects of subjective well-being. Emotional well-being refers to the emotional quality of an individual's everyday experience-the frequency and intensity of experiences of joy, stress, sadness, anger, and affection that make one's life pleasant or unpleasant. Life evaluation refers to the thoughts that people have about their life when they think about it. We raise the question of whether money buys happiness, separately for these two aspects of well-being. We report an analysis of more than 450,000 responses to the Gallup-Healthways Well-Being Index, a daily survey of 1,000 US residents conducted by the Gallup Organization. We find that emotional well-being (measured by questions about emotional experiences yesterday) and life evaluation (measured by Cantril's Self-Anchoring Scale) have different correlates. Income and education are more closely related to life evaluation, but health, care giving, loneliness, and smoking are relatively stronger predictors of daily emotions. When plotted against log income, life evaluation rises steadily. Emotional well-being also rises with log income, but there is no further progress beyond an annual income of ~$75,000. Low income exacerbates the emotional pain associated with such misfortunes as divorce, ill health, and being alone. We conclude that high income buys life satisfaction but not happiness, and that low income is associated both with low life evaluation and low emotional well-being.

The Pursuit of Unhappiness: The Elusive Psychology of Well-Being

This new book by Daniel M. Haybron (Oxford University Press, 2008) is reviewed here on MetaPsychology by Daniel O'Brien.

Anchoring Vignettes: Sample Selection Issues and Longitudinal Aspects

Omar Paccagnella from the Dept. of Economics at the University of Padua has a working paper on "Anchoring Vignettes with Sample Selection". The paper aims at extending the standard (hopit) model for estimating vignettes in order to allow the specification of some selection variables.

The concern about sample selection arises from when a respondent in the SHARE (ageing) study completes the main CAPI questionnaire, but does not fill in the extra questions that they have been randomly assigned to - which are anchoring vignettes. Paccagnella states that fitting models to the observed sample ignoring potential selection bias may lead to inconsistent estimates. His findings show that there is evidence of sample selection effects even in the case of high rates of collected vignettes (higher than 85%), but in such cases the bias induced by the selection mechanism is negligible.

Paccagnella also has a working paper in presentation format: on using anchoring vignettes in a longitudinal context, examining work disability reporting from SHARE. This work concludes that when moving from one wave of the SHARE study to the other, that individual thresholds shift upwards and that respondents assess a work limitation less easily in 2006 than in 2004. Also, variations over time in work disability reporting are reported to be much stronger than variations across countries.

Paccagnella has also written on using vignettes to enhance the comparability of self-rated life satisfaction, using the SHARE data. And a paper on voluntary private health insurance for the over-50's, also using the SHARE data.

Income, aging, health and wellbeing around the world

During 2006, the Gallup Organization collected World Poll data using an identical questionnaire from national samples of adults from 132 countries. This paper presents an analysis of the data on life-satisfaction (happiness) and health satisfaction and their relationships with national income, age, and life-expectancy. Average happiness is strongly related to per capita national income, with each doubling of income associated with a near one point increase in life satisfaction on a scale from 0 to 10. Unlike previous findings, the effect holds across the range of international incomes; if anything, it is slightly stronger among rich countries. Conditional on national income, recent economic growth makes people unhappier, improvements in life-expectancy make them happier, but life-expectancy itself has little effect. Age has an internationally inconsistent relationship with happiness. National income moderates the effects of aging on self-reported health, and the decline in health satisfaction and rise in disability with age are much stronger in poor countries than in rich countries. In line with earlier findings, people in much of Eastern Europe and in the countries of the former Soviet Union are particularly unhappy and particularly dissatisfied with their health, and older people in those countries are much less satisfied with their lives and their health than are younger people. HIV prevalence in Africa has little effect on Africans’ life or health satisfaction; the fraction of Kenyans who are satisfied with their personal health is the same as the fraction of Britons and higher than the fraction of Americans. The US ranks 81st out of 115 countries in the fraction of people who have confidence in their healthcare system, and has a lower score than countries such as India, Iran, Malawi, or Sierra Leone. While the strong relationship between life-satisfaction and income gives some credence to the measures, the lack of such correlations for health shows that happiness (or self-reported health) measures cannot be regarded as useful summary indicators of human welfare in international comparisons.

Deaton '07