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Estimating the influence of life satisfaction and positive affect on later income using sibling fixed effects

De Neve, Jan-Emmanuel and Oswald, Andrew J. (2012) Estimating the influence of life satisfaction and positive affect on later income using sibling fixed effects. Proceedings of the National Academy of Sciences of the United States of America, 109 (49). pp. 19953-19958. ISSN 0027-8424

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Identification Number: 10.1073/pnas.1211437109

Abstract

The question of whether there is a connection between income and psychological well-being is a long-studied issue across the social, psychological, and behavioral sciences. Much research has found that richer people tend to be happier. However, relatively little attention has been paid to whether happier individuals perform better financially in the first place. This possibility of reverse causality is arguably understudied. Using data from a large US representative panel, we show that adolescents and young adults who report higher life satisfaction or positive affect grow up to earn significantly higher levels of income later in life. We focus on earnings approximately one decade after the person's well-being is measured; we exploit the availability of sibling clusters to introduce family fixed effects; we account for the human capacity to imagine later socioeconomic outcomes and to anticipate the resulting feelings in current well-being. The study's results are robust to the inclusion of controls such as education, intelligence quotient, physical health, height, self-esteem, and later happiness. We consider how psychological well-being may influence income. Sobel-Goodman mediation tests reveal direct and indirect effects that carry the influence from happiness to income. Significant mediating pathways include a higher probability of obtaining a college degree, getting hired and promoted, having higher degrees of optimism and extraversion, and less neuroticism.

Item Type: Article
Official URL: http://www.pnas.org/
Additional Information: © 2012 the National Academy of Sciences of the United States of America
Divisions: Centre for Economic Performance
Subjects: B Philosophy. Psychology. Religion > BF Psychology
H Social Sciences > HN Social history and conditions. Social problems. Social reform
Sets: Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 18 Dec 2012 15:48
Last Modified: 20 Aug 2019 18:18
URI: http://eprints.lse.ac.uk/id/eprint/47733

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