Premium
Are A mericans Really Less Happy with Their Incomes?
Author(s) -
Kapteyn Arie,
Smith James P.,
Van Soest Arthur
Publication year - 2013
Publication title -
review of income and wealth
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.024
H-Index - 57
eISSN - 1475-4991
pISSN - 0034-6586
DOI - 10.1111/j.1475-4991.2012.00532.x
Subject(s) - comparability , economics , scale (ratio) , distribution (mathematics) , demographic economics , econometrics , psychology , public economics , mathematics , geography , mathematical analysis , cartography , combinatorics
Recent economic research on international comparisons of subjective well‐being suffers from several important biases due to the potential incomparability of response scales within and across countries. In this paper we concentrate on self‐reported satisfaction with income in two countries: the N etherlands and the U.S . The comparability problem is addressed by using anchoring vignettes. We find that in the raw data, A mericans appear decidedly less satisfied with their income than the D utch. It turns out however that after response scale adjustment based on vignettes, the distribution of satisfaction in the two countries is essentially identical. In addition, we find that the within‐country cross‐sectional effect of income on satisfaction—a key parameter in the recent debate in the economic literature—is significantly underestimated, especially in the U.S ., when differences in response scales are not taken into account.