People do not adapt. New analyses of the dynamic effects of own and reference income on life satisfaction

• Published in: Journal of economic behavior & organization Vol. 177; pp. 494 - 513
• Main Author: Kaiser, Caspar
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 01.09.2020
• Subjects: Adaptation; BHPS; Equivalence scales; GSOEP; Income comparisons; Life satisfaction; Subjective wellbeing; UKHLS; Understanding society; GSOEP; D6; Subjective wellbeing; BHPS; I31; Income comparisons; Equivalence scales; UKHLS; Understanding society; Life satisfaction; Adaptation

Do people adapt to changes in income? In contradiction to much of the previous literature, I find no evidence of adaptation to income in GSOEP (1984–2015) and UKHLS (1996–2017) data. Furthermore, I find that people also do not adapt to changes in reference income. Instead, reference income effects m...