Jump to ContentJump to Main Navigation
Show Summary Details
More options …

Jürges, Hendrik

The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Ludwig, Sandra / Schmitz, Hendrik

Ed. by Barigozzi, Francesca / Brunner, Johann / Fleck, Robert / Mastrobuoni, Giovanni / Mendola, Mariapia / Requate, Till / de Vries, Frans / Wenzel, Tobias


IMPACT FACTOR 2018: 0.520
5-year IMPACT FACTOR: 0.556

CiteScore 2018: 0.54

SCImago Journal Rank (SJR) 2018: 0.356
Source Normalized Impact per Paper (SNIP) 2018: 0.394

Online
ISSN
1935-1682
See all formats and pricing
More options …
Volume 16, Issue 3

Issues

Volume 6 (2006)

Volume 4 (2004)

Volume 2 (2002)

Volume 1 (2001)

Nominal or Real? The Impact of Regional Price Levels on Satisfaction with Life

Thomas Deckers
  • Institute of Applied Microeconomics, University of Bonn, Adenauerallee 24–42, 53113 Bonn, Germany
  • Other articles by this author:
  • De Gruyter OnlineGoogle Scholar
/ Armin Falk
  • Institute of Applied Microeconomics, University of Bonn, Adenauerallee 24–42, 53113 Bonn, Germany
  • Other articles by this author:
  • De Gruyter OnlineGoogle Scholar
/ Hannah Schildberg-Hörisch
  • Corresponding author
  • Institute of Applied Microeconomics, University of Bonn, Adenauerallee 24–42, 53113 Bonn, Germany
  • Email
  • Other articles by this author:
  • De Gruyter OnlineGoogle Scholar
Published Online: 2016-06-08 | DOI: https://doi.org/10.1515/bejeap-2015-0215

Abstract

According to economic theory, real income, i. e., nominal income adjusted for purchasing power, should be the relevant source of life satisfaction. Previous work, however, has studied the impact of inflation-adjusted nominal income and hardly taken into account regional differences in purchasing power. We use novel data to study how regional price levels affect life satisfaction. The data set comprises a price level for each of the 428 administrative districts in Germany. Controlling for district heterogeneity other than the price level, our results show that higher price levels significantly reduce life satisfaction.

Keywords: life satisfaction; neutrality of money; price index; real income; standard of living

JEL Classification: D60; C23; D31

References

  • Akerlof, G., and R. Shiller. 2009. Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism. Princeton: Princeton University Press.Google Scholar

  • Becker, A., T. Deckers, T. Dohmen, A. Falk, and F. Kosse. 2012. “The Relationship between Economic Preferences and Psychological Personality Measures.” Annual Review of Economics 4:453–78.CrossrefWeb of ScienceGoogle Scholar

  • Beegle, K., K. Himelein, and M. Ravallion. 2009. “Frame-of-Reference Bias in Subjective Welfare Regressions.” Research Working Papers, World Bank 1:1–36.Google Scholar

  • Boes, S., M. Lipp, and R. Winkelmann. 2007. “Money Illusion under Test.” Economics Letters 94:332–7.CrossrefGoogle Scholar

  • Borghans, L., A. L. Duckworth, J. J. Heckman, and B. ter Weel. 2008. “The Economics and Psychology of Personality Traits.” Journal of Human Resources 43:972–1059.CrossrefGoogle Scholar

  • Clark, A. E., and A. J. Oswald. 1996. “Satisfaction and Comparison Income.” Journal of Public Economics 61:359–81.CrossrefGoogle Scholar

  • Clark, A. E., P. Frijters, and M. A. Shields. 2008. “Relative Income, Happiness, and Utility: An Explanation for the Easterlin Paradox and Other Puzzles.” Journal of Economic Literature 46:95–144.Web of ScienceGoogle Scholar

  • Costa, P., and R. McCrae. 1992. Revised NEO Personality Inventory (NEO PI-R) and NEO Five-Factor Inventory (NEO-FFI). Odessa, FL: Psychological Assessment Resources.Google Scholar

  • Di Tella, R., and R. MacCulloch. 2006. “Some Uses of Happiness Data in Economics.” The Journal of Economic Perspectives 20:25–46.CrossrefGoogle Scholar

  • Dolan, P., T. Peasgood, and M. White. 2008. “Do We Really Know What Makes Us Happy? A Review of the Economic Literature on the Factors Associated with Subjective Well-Being.” Journal of Economic Psychology 29:94–122.CrossrefWeb of ScienceGoogle Scholar

  • Elbel, E., and U. Egner. 2008. “Verbraucherpreisstatistik auf neuer Basis 2005.” In Wirtschaft und Statistik 4/2008, Statistisches Bundesamt, 339–50. Wiesbaden.

  • Fafchamps, M., and F. Shilpi. 2008. “Subjective Welfare, Isolation, and Relative Consumption.” Journal of Development Economics 86:43–60.CrossrefWeb of ScienceGoogle Scholar

  • Ferrer-i-Carbonell, A. 2005. “Income and Well-Being: An Empirical Analysis of the Comparison Income Effect.” Journal of Public Economics 89:997–1019.CrossrefGoogle Scholar

  • Ferrer-i-Carbonell, A., and P. Frijters. 2004. “How Important Is Methodology for the Estimates of the Determinants of Happiness?” The Economic Journal 114:641–59.Google Scholar

  • Fliessbach, K., B. Weber, P. Trautner, T. Dohmen, U. Sunde, C. E. Elger, and A. Falk. 2007. “Social Comparison Affects Reward-Related Brain Activity in the Human Ventral Striatum.” Science 318:1305–8.Web of ScienceGoogle Scholar

  • Frey, B. S., and A. Stutzer. 2002. “What Can Economists Learn from Happiness Research?” Journal of Economic Literature 40:402–35.CrossrefGoogle Scholar

  • Frijters, P., J. P. Haisken-DeNew, and M. A. Shields. 2004. “Money Does Matter! Evidence from Increasing Real Income and Life Satisfaction in East Germany Following Reunification.” American Economic Review 94:730–40.CrossrefGoogle Scholar

  • Glaeser, E. 1998. “Should transfer payments be indexed to local price levels?” Regional Science and Urban Economics 28:1–20.CrossrefGoogle Scholar

  • Graham, C. 2011. “Adaptation Amidst Prosperity and Adversity: Insights from Happiness Studies from Around the World.” The World Bank Research Observer 26:105–37.CrossrefWeb of ScienceGoogle Scholar

  • Headey, B., R. Muffels, and M. Wooden. 2007. “Money Does Not Buy Happiness: Or Does It? A Reassessment Based on the Combined Effects of Wealth, Income and Consumption.” Social Indicators Research 87:65–82.Web of ScienceCrossrefGoogle Scholar

  • Kahneman, D., and A. Deaton. 2010. “High Income Improves Evaluation of Life but Not Emotional Well-Being.” Proceedings of the National Academy of Sciences 107:16489–93.Google Scholar

  • Kawka, R., S. Beisswenger, G. Costa, H. Kemmerling, S. Muller, T. Putz, H. Schmidt, S. Schmidt, and M. Trimborn. 2009. Regionaler Preisindex, Berichte Band 30. Bonn: Stadt- und Raumforschung.Google Scholar

  • Litchfield, J., B. Reilly, and M. Veneziani. 2012. “An Analysis of Life Satisfaction in Albania: An Heteroscedastic Ordered Probit Model Approach.” Journal of Economic Behavior and Organization 83:731–41.Google Scholar

  • Luttmer, E. 2005. “Neighbors as Negatives: Relative Earnings and Well-Being.” Quarterly Journal of Economics 120:963–1002.Google Scholar

  • Oswald, A. 1997. “Happiness and Economic Performance.” The Economic Journal 107:1815–31.Google Scholar

  • Oswald, A. 2008. “On the Curvature of the Reporting Function from Objective Reality to Subjective Feelings.” Economic Letters 100:369–72.CrossrefGoogle Scholar

  • Ravallion, M., and M. Lokshin. 2001. “Identifying Welfare Effects from Subjective Questions.” Economica 68:335–57.Google Scholar

  • Ravallion, M., and M. Lokshin. 2002. “Self-Rated Economic Welfare in Russia.” European Economic Review 46:1453–73.CrossrefGoogle Scholar

  • Ravallion, M., and M. Lokshin. 2010. “Who Cares about Relative Deprivation?” Journal of Economic Behavior and Organization 73:171–85.Google Scholar

  • Roos, M. W. M. 2006. “Regional Price Levels in Germany.” Applied Economics 38:1553–66.CrossrefGoogle Scholar

  • Rotter, J. 1966. “Generalized Expectancies for Internal Versus External Control of Reinforcement.” Psychological Monographs 80:1–28.CrossrefGoogle Scholar

  • Schupp, J., and G. G. Wagner. 2002. “Maintenance of and Innovation in Long-Term Panel Studies the Case of the German Socio-Economic Panel (GSOEP).” Allgemeines Statistisches Archiv 86:163–75.Google Scholar

  • Senik, C. 2004. “When Information Dominates Comparison: Learning from Russian Subjective Panel Data.” Journal of Public Economics 88: 2099–123.Crossref

  • Senik, C. 2009. “Direct Evidence on Income Comparisons and Their Welfare Effects.” Journal of Economic Behavior and Organization 72:408–24.Google Scholar

  • Stiglitz, J., A. Sen, and J. P. Fitoussi. 2009. “Report by the Commission on the Measurement of Economic Performance and Social Progress.” Accessed on May 30, 2016. www.stiglitz-sen-fitoussi.fr.

  • Stone, A. A., and C. Mackie. 2014. Subjective Well-Being: Measuring Happiness, Suffering, and Other Dimensions of Experience. National Academies Press.

  • Stutzer, A. 2004. “The Role of Income Aspirations in Individual Happiness.” Journal of Economic Behavior and Organization 54:89–109.Google Scholar

  • Stutzer, A., and B. S. Frey. 2010. “Recent Advances in the Economics of Individual Subjective Well-Being.” Social Research: An International Quarterly 77:679–714.Google Scholar

  • Wagner, G. G., J. R. Frick, and J. Schupp. 2007. The German Socio-Economic Panel Study (SOEP) – Evolution, Scope and Enhancements. SOEP Papers 1. Berlin: DIW Berlin, The German Socio-Economic Panel (SOEP).Google Scholar

About the article

Published Online: 2016-06-08

Published in Print: 2016-07-01


Financial support from the German Science Foundation “Deutsche Forschungsgemeinschaft” (that did not influence study design or interpretation of the results) through SFB-TR 15 is gratefully acknowledged.


Citation Information: The B.E. Journal of Economic Analysis & Policy, Volume 16, Issue 3, Pages 1337–1358, ISSN (Online) 1935-1682, ISSN (Print) 2194-6108, DOI: https://doi.org/10.1515/bejeap-2015-0215.

Export Citation

©2016 by De Gruyter.Get Permission

Comments (0)

Please log in or register to comment.
Log in