In this study we examine the association between subjective well-being and material welfare using the data of 3600 individuals from the TÁRKI Household Monitor for the year 2007. Most of the empirical papers on the effect of income on subjective well-being use either OLS regression or ordered probit model. We apply various methods to explore this relationship more deeply. Comparing the results of OLS regression with quantile regression, and the ordered probit model with a generalized ordered probit model we show that more flexible techniques provide a more complete picture of the income-satisfaction relationship. In the OLS regression income has a positive impact on satisfaction, but the quantile regression models show that this association is less strong at the upper end, and stronger at the lower end of the conditional distribution of well-being. The standard ordered probit model predicts a significant positive effect at the highest satisfaction category, whereas the generalized model finds that income does not affect the probability of this highest response. On the other hand the generalized ordered probit model predicts a more negative effect for the lower response categories of satisfaction than the standard ordered probit model. These results suggest that higher income reduces unhappiness, but one can be satisfied without high income as well. Our results draw attention to the importance of the choice of methods in satisfaction research.
subjective well-being income quantile regression generalized ordered probit