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The econometrics of happiness: Are we underestimating the returns to education and income?

Christopher P Barrington-Leigh

arXiv 31 Jul 2018 · Econometrics · publishedJournal of Public Economics (2024) · 10 citations (OpenAlex)

arXiv:1807.11835 · PDF · DOI · OpenAlex · Extracted main text

Abstract

This paper describes a fundamental and empirically conspicuous problem inherent to surveys of human feelings and opinions in which subjective responses are elicited on numerical scales. The paper also proposes a solution. The problem is a tendency by some individuals -- particularly those with low levels of education -- to simplify the response scale by considering only a subset of possible responses such as the lowest, middle, and highest. In principle, this “focal value rounding” (FVR) behavior renders invalid even the weak ordinality assumption often used in analysis of such data. With “happiness” or life satisfaction data as an example, descriptive methods and a multinomial logit model both show that the effect is large and that education and, to a lesser extent, income level are predictors of FVR behavior. A model simultaneously accounting for the underlying wellbeing and for the degree of FVR is able to estimate the latent subjective wellbeing, i.e. the counterfactual full-scale responses for all respondents, the biases associated with traditional estimates, and the fraction of respondents who exhibit FVR. Addressing this problem helps to resolve a longstanding puzzle in the life satisfaction literature, namely that the returns to education, after adjusting for income, appear to be small or negative. Due to the same econometric problem, the marginal utility of income in a subjective wellbeing sense has been consistently underestimated.

Citation extraction

70
references
103
in-text mentions
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distinct cited
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Most heavily cited references

The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.

ReferenceIntensityMentionsSectionsMain text
1OECD (2013) OECD Guidelines on Measuring Subjective Well-being1.00053100%
2Clark, A., Oswald, A (1996) Satisfaction and comparison income0.87482100%
3Alwin, D.F (1997) Feeling thermometers versus 7-point scales: Which are better?0.84333100%
4Frijters, P., Krekel, C (2021) A Handbook for Wellbeing Policy-Making: History, Theory, Measurement, Implementation, and Examples0.81142100%
5Powdthavee, N., Lekfuangfu, W.N., Wooden, M (2015) What's the good of education on our overall quality of life? a simultaneous equation model of education and life satisfaction fo…0.81142100%
6UK Treasury (2021) Wellbeing Guidance for Appraisal: Supplementary Green Book Guidance0.73732100%
7Barrington-Leigh, C., Sloman, S (2016) Life satisfaction among Aboriginals in the Canadian Prairies: Evidence from the Equality, Security and Community survey self0.64441100%
8Conti, G., Pudney, S (2011) Survey design and the analysis of satisfaction0.64422100%
9Easterlin, R (1974) Does Economic Growth Improve the Human Lot? Some Empirical Evidence, in: David, P., Reder, M. (Eds.), Nations and Households in…0.64422100%
10Frijters, P., Clark, A.E., Krekel, C., Layard, R (2020) A happy choice: wellbeing as the goal of government0.64422100%

Showing the top 10 of 70 scored citations.

Cited by, within the corpus

arXiv econ.EM papers that cite this one, ranked by how heavily they lean on it.

Citing paperIntensityMentionsSections
1Identifying causal effects with subjective ordinal outcomes0.73733