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Keeping up with the Schmidts
Gundi KniesDIW Berlin and University of Bristol
Do better off neighbours cause unhappiness?
March 29, 2007 G. Knies/ SOEP & CMPO
Structure of the talk
1. Problem Formulation
2. Methdology
3. Data
4. Empirical Results
5. Discussion
March 29, 2007 G. Knies/ SOEP & CMPO
1. Problem Formulation (1)- Neighbourhood Research -
Empirical studies: comparison with better-off neighbours
increases propensity to riot (Gurr 1970, Canache (Gurr 1970, Canache 1996)1996)
“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
Theory of relative Deprivation
March 29, 2007 G. Knies/ SOEP & CMPO
1. Problem Formulation (2)- Happiness Research -
Impact of Satisfaction with the Community and Neighbourhood on Life Satisfaction:
Neighbours as a Reference Group:
Michalos 1986: Multiple Discrepancy TheoryLuttmer 2005: relative consumption
Sirgy & Cornwell 2002; Shields & Wooden 2003
March 29, 2007 G. Knies/ SOEP & CMPO
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 = β1 log x1i + γ1 log z1i+ εi
March 29, 2007 G. Knies/ SOEP & CMPO
2. Methodology (2)
Playing Devil‘s Advocate:
- lower life satisfaction = feeling deprived?
- interaction with the NB
- neighbourhood infrastructure effects
- unobs. heterogeneity controlled
March 29, 2007 G. Knies/ SOEP & CMPO
3. DataGerman Socio-Economic Panel Neighbourhood Indicators
Characteristics ofindividuals and households (all years)NB Infrastructure (94,99,04)
IDs: address, hhid, persid
Ø disposable pc income (Infas)
ID= PLZ93, 98
PLZ
Impact of NB on... Life-Satisfaction
Zip-code areas:9-63,000 inhabitantsØ 9,000 inhabitants
(SOEP: 17,000)
March 29, 2007 G. Knies/ SOEP & CMPO
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
March 29, 2007 G. Knies/ SOEP & CMPO
4. Empirical Results (1)Mean Life Satisfaction by Classes of Household and
Neighbourhood Income 1999
5
6
7
8
1 2 3 4 5
household income
Ø l
ife s
ati
sfact
ion
nb y 3
only hh y
5
6
7
8
1 2 3 4 5
household income
Ø life
sati
sfact
ion
nb y 1
nb y 2
nb y 3
nb y 4
nb y 5
March 29, 2007 G. Knies/ SOEP & CMPO
4. Multivariate Prediction of Life-Satisfaction
Control Variablesb-Coefficients
ALL
pc Neighbourhood Income (log)
0.21*
per capita Household Income (log)
0.47**
Number of Observations 12,251
R² 0.1
Notes: Model controls for marital status, number of children in the household, disability status basic characteristics, employment status and type of community.Source: SOEP 1999 and neighbourhood indicators on the zip-code level. Author‘s calculations.
NBY>HHY
HHY>NBY
0.36* ~ 0
0.53** 0.39**
6,596 5,671
0.1 0.1
March 29, 2007 G. Knies/ SOEP & CMPO
4. Measurement of Relative Deprivation
Compared to others I did not achieved what I deserve
AllHHY>NBY
NBY> HHY
totally agree 7.4 5.4 9.3
agree slightly 24.4 20.6 28.0
disagree slightly 43.2 46.1 40.4
totally disagree 25.0 27.9 22.3
Total 100 100 100
Ordered Probit Results
NBY 0.05
HHY 0.38**
N 12,145
Pseudo R²
0. 04
March 29, 2007 G. Knies/ SOEP & CMPO
4. Interactions 1999
Control VariablesHappiness Model
Young Kids
Dog Work Socials
Neighbourhood y (log)
0.24* 0.08 0.23 0.2
young kid * NBY -0.31
dog owner * NBY 0.37
work * NBY
-0.24
socials * NBY 0.07
Household y (log) 0.46** 0.47** 0.43** 0.47**
Number of Obs. 12,438 10,868 7,173 12,224
R² 0.1 0.1 0.06 0.1
March 29, 2007 G. Knies/ SOEP & CMPO
4. Neighbourhood Infrastructure
Reduction of β neighbourhood income to 0.04
Not statistically significant:β >0: kindergarten, primary school, cityβ <0: banks, shops, doctors, public transport, youth club, club for elderly
Statistically significant effects:β <0: parks, sports ground, gym, bars
March 29, 2007 G. Knies/ SOEP & CMPO
4. Unobserved Heterogeneity
Fixed Effects Models
^NBY ^HHY N R²
All 0.42 0.33** 8,491 0.03
Stayers 0.39 0.41** 6,966 0.03
Movers 0.37 0.11 2,592 0.04
Source: SOEP 21. Author‘s calculation.
March 29, 2007 G. Knies/ SOEP & CMPO
5. Discussion
If anything, people in Germany are happier the more income their neighbours have!
Is the neighbourhood scale inappropriate?
Are not all neighbours relevant?
Is the theory wrong?
March 29, 2007 G. Knies/ SOEP & CMPO
Definitions: Income MeasuresIncome components Federal
Statistical Office
GSOEP
(CNEF)
market incomes + +
income maintenance transfers/ soc. sec. + +
other regular monetary transfers + +
taxes on income and assets - -
NI contributions, ‘other regular payments’ - -
assumed income from living in owner-occupied housing
+ +
asset income flows + (assumed) +
sick payments + (assumed) /
income of non-profit organisations + /
refunds from health insurers + (assumed) /
March 29, 2007 G. Knies/ SOEP & CMPO
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 componentsPer capita incomes:
HHY/HH size = Σ NB HHY/ NB population