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Happiness and Comparison Income: Evidence from Canada

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Abstract

Using data from the Canadian National Population Health Survey (1994–2009), this study examines the relationship between comparison income and individual happiness. This study utilizes two definitions of comparison income: Average income of the reference group and the difference between one’s own household income and the average income of the reference group. The estimations using the Ordered Probit Method suggest that an increase in the average income of the reference group reduces individual happiness. On the other hand, an individual’s happiness increases when his/her own household income becomes larger in comparison to the average income of the reference group. To check the robustness of these results, this study re-estimated all models using a different composition of the reference group. However, the basic results still hold, thus confirming that comparison income has a significant negative impact on an individual’s happiness level.

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Notes

  1. A number of studies, using Canadian data, examined determinants of happiness of Canadian people (Helliwell and Barrington‐Leigh 2010; Layard 2005; Hill 2004). However, these studies did not focus on the impact of comparison income on individual’s happiness.

  2. To get access to the data for this research, the researcher had to work at the Research Data Centre run by Statistics Canada. During the time the researcher worked for this project, The NPHS 2010/11 was not available at the Research Data Centre. Consequently, the data from the NPHS 201/11 was not included in the estimation process.

  3. Inflation has both positive and negative impacts on happiness. People may derive satisfaction from an increase in nominal income due to inflation (Shafir et al. 1997). However, inflation may lead to political and economic chaos and also a loss in national prestige due to the falling exchange rate (Frey and Stutzer 2002). These political and economic events may have negative impact on happiness.

  4. The factor .274 is the coefficient of independent variable ‘Being Married’ in the order probit model shown in the fourth column of Table 3. The divisor .00088 is obtained by dividing the coefficient of ‘log Household Income’ (.088) by 100. This division is done in order to get equivalent household income value in percentage form.

  5. Using Log(Y) along with Log(Y)−Log(Yr), where Yr is fixed value of many individuals, may lead to high degree of co-linearity. For this reason, the results of this exercise should be taken with caution.

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  1. Department of Economics, Thompson Rivers University, Kamloops, BC, Canada

    Ehsan Latif

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Latif, E. Happiness and Comparison Income: Evidence from Canada. Soc Indic Res 128, 161–177 (2016). https://doi.org/10.1007/s11205-015-1024-4

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