English title: Income and happiness across Europe: Do reference values matter?

Author(s): Guglielmo Maria Caporale - Yannis Georgellis - Nicholas Tsitsianis - Ya Ping Yin -

Language: English

Type: Journal article

Year: 2008


Using cross-sectional data from the first two rounds of the European Social Survey (ESS), we examine the relationship between income, relative income and happiness across 19 European countries. We find that a positive and statistically significant relationship between income and happiness does exist, but such a relationship is weakened by reference income. We also find that while reference income exerts a negative impact on happiness in the case of Western European countries, its effect is positive in the case of the Eastern European countries, a finding that is consistent with the ‘tunnel effect’ hypothesis. This suggests that for Eastern Europeans reference income is likely to be a source of information for forming expectations about their future economic prospects, rather than a yardstick measure for social comparisons.

Volume: 30

Issue: 1

From page no: 42

To page no: 51

Refereed: Yes

DOI: 10.1016/J.JOEP.2008.06.004

Journal: Journal of Economic Psychology