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Keeping up with the Schmidts

Keeping up with the Schmidts. Gundi Knies DIW Berlin and University of Bristol. Do better off neighbours cause unhappiness?. Structure of the talk. Problem Formulation Methdology Data Empirical Results Discussion. Problem Formulation (1) - Neighbourhood Research -.

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Keeping up with the Schmidts

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  1. Keeping up with the Schmidts Gundi Knies DIW Berlin and University of Bristol Do better off neighbours cause unhappiness?

  2. Structure of the talk • Problem Formulation • Methdology • Data • Empirical Results • Discussion G. Knies/ SOEP & CMPO

  3. Problem Formulation (1)- Neighbourhood Research - Theory of relative Deprivation “a person’s sense of contentment depends not on objective conditions, but on the subjective perceptions and comparisons of self to others”Lopez Turley 2002, S. 672-673 Empirical studies: comparison with better-off neighbours increases propensity to riot (Gurr 1970, Canache 1996) G. Knies/ SOEP & CMPO

  4. Problem Formulation (2)- Happiness Research - Impact of Satisfaction with the Community and Neighbourhood on Life Satisfaction: Sirgy & Cornwell 2002; Shields & Wooden 2003 Neighbours as a Reference Group: Michalos 1986: Multiple Discrepancy Theory Luttmer 2005: relative consumption G. Knies/ SOEP & CMPO

  5. 2. Methodology (1) Individuals living in neighbourhoods where they are worse off than their average neighbour are unhappier Given one’s own income: How is happiness affected by one’s neighbour’s income? Micro-economic happiness modell: LSi = α + β´Xi + γ’Zi+ εi xi = per capita household income zi = per capita neighbourhood income LSi = β1log x1i + γ1log z1i+ εi G. Knies/ SOEP & CMPO

  6. 2. Methodology (2) Playing Devil‘s Advocate: - lower life satisfaction = feeling deprived? - interaction with the NB - neighbourhood infrastructure effects - unobs. heterogeneity controlled G. Knies/ SOEP & CMPO

  7. 3. Data Neighbourhood Indicators German Socio-Economic Panel Characteristics of individuals and households (all years) NB Infrastructure (94,99,04) IDs: address, hhid, persid Ø disposable pc income (Infas) ID= PLZ 93, 98 PLZ Zip-code areas: 9-63,000 inhabitants Ø 9,000 inhabitants (SOEP: 17,000) Impact of NB on... Life-Satisfaction G. Knies/ SOEP & CMPO

  8. 4. Empirical Results: Structure I. Household Income, Neighbourhood Income and Average Happiness in 1999 (very similar results in 1994) II. Multivariate Prediction 1999 (very similar results in 1994) III. Further Hypotheses/ Robustness tests - Measure of Relative Deprivation - Effects of Neighbourhood Infrastructure - Interaction with NB - Unobserved Heterogeneity G. Knies/ SOEP & CMPO

  9. 4. Empirical Results (1)Mean Life Satisfaction by Classes of Household and Neighbourhood Income 1999 G. Knies/ SOEP & CMPO

  10. 4. Multivariate Prediction of Life-Satisfaction G. Knies/ SOEP & CMPO

  11. 4. Measurement of Relative Deprivation G. Knies/ SOEP & CMPO

  12. 4. Interactions 1999 G. Knies/ SOEP & CMPO

  13. 4. Neighbourhood Infrastructure Reduction of β neighbourhood income to 0.04 Statistically significant effects: β <0: parks, sports ground, gym, bars Not statistically significant: β >0: kindergarten, primary school, city β <0: banks, shops, doctors, public transport, youth club, club for elderly G. Knies/ SOEP & CMPO

  14. 4. Unobserved Heterogeneity G. Knies/ SOEP & CMPO

  15. 5. Discussion If anything, people in Germany are happier the more income their neighbours have! Is the theory wrong? Are not all neighbours relevant? Is the neighbourhood scale inappropriate? G. Knies/ SOEP & CMPO

  16. Definitions: Income Measures G. Knies/ SOEP & CMPO

  17. Definitions Income Measures: Σ (SOEP HHY* HH Pop-Weight)= SOEP National Y Σ (PLZ total HHY)= Infas National Y Infas National Y = SOEP National Y Assumptions: distribution of NB Y unaltered through three additional income components Per capita incomes: HHY/HH size= Σ NB HHY/ NB population G. Knies/ SOEP & CMPO

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