Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/20415
Authors: 
Winkelmann, Rainer
Boes, Stefan
Year of Publication: 
2004
Series/Report no.: 
IZA Discussion paper series 1175
Abstract: 
Empirical studies on the relationship between income and happiness commonly use standard ordered response models, the most well-known representatives being the ordered logit and the ordered probit. However, these models restrict the marginal probability effects by design, and therefore limit the analysis of distributional aspects of a change in income, that is, the study of whether the income effect depend on a person's happiness. In this paper we pinpoint the shortcomings of standard models and propose two alternatives, namely generalized threshold and sequential models. With data of two waves of the German Socio- Economic Panel, 1984 and 1997, we show that the more general models yield different marginal probability effects than standard models.
Subjects: 
ordered response models
marginal effects
subjective well-being
JEL: 
I31
C25
Document Type: 
Working Paper

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