Boyce, Christopher J., Wood, Alex M. 
ORCID: 0000-0002-8010-1455, Banks, James, Clark, Andrew E. and Brown, Gordon D.A.
(2013)
Money, well-being, and loss aversion: does an income loss have a greater effect on well-being than an equivalent income gain?
Psychological Science, 24 (12).
pp. 2557-2562.
ISSN 0956-7976
Abstract
Higher income is associated with greater well-being, but do income gains and losses affect well-being differently? Loss aversion, whereby losses loom larger than gains, is typically examined in relation to decisions about anticipated outcomes. Here, using subjective-well-being data from Germany (N = 28,723) and the United Kingdom (N = 20,570), we found that losses in income have a larger effect on well-being than equivalent income gains and that this effect is not explained by diminishing marginal benefits of income to well-being. Our findings show that loss aversion applies to experienced losses, challenging suggestions that loss aversion is only an affective-forecasting error. By failing to account for loss aversion, longitudinal studies of the relationship between income and well-being may have overestimated the positive effect of income on well-being. Moreover, societal well-being might best be served by small and stable income increases, even if such stability impairs long-term income growth.
| Item Type: | Article |
|---|---|
| Official URL: | http://pss.sagepub.com/ |
| Additional Information: | © 2013 Association for Psychological Science |
| Divisions: | Centre for Economic Performance Psychological and Behavioural Science |
| Subjects: | H Social Sciences > HC Economic History and Conditions H Social Sciences > HV Social pathology. Social and public welfare. Criminology |
| Date Deposited: | 02 Sep 2014 11:26 |
| Last Modified: | 14 Nov 2024 01:00 |
| URI: | http://eprints.lse.ac.uk/id/eprint/59337 |
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