Keeping up with the
Schmidts
Do better off neighbours cause unhappiness?
Gundi Knies
DIW Berlin and University of Bristol
Structure of the talk
1.
2.
3.
4.
5.
Problem Formulation
Methdology
Data
Empirical Results
Discussion
March 29, 2007
G. Knies/ SOEP & CMPO
1. 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)
March 29, 2007
G. Knies/ SOEP & CMPO
1. 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
March 29, 2007
G. Knies/ SOEP & CMPO
2. Methodology (1)
Individuals
neighbourhoods
where
Given one’sliving
own in
income:
How is happiness
they
are by
worse
offneighbour’s
than their average
affected
one’s
income?
neighbour are unhappier
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. Data
German Socio-Economic Panel
Neighbourhood Indicators
Characteristics of
Ø disposable
individuals and households
(all years) PLZ pc income (Infas)
ID= PLZ
NB Infrastructure
93, 98
(94,99,04)
IDs: address, hhid, persid
Impact of NB on...
Life-Satisfaction
March 29, 2007
G. Knies/ SOEP & CMPO
Zip-code areas:
9-63,000 inhabitants
Ø 9,000 inhabitants
(SOEP: 17,000)
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
88
Ø life
life satisfaction
Ø
satisfaction
nb y 1
nb y 2
77
nbnb
y 3y 3
nb y 4
only hh y
nb y 5
66
55
1
1
22
3
3
4
4 5
household
income
household income
March 29, 2007
G. Knies/ SOEP & CMPO
5
4. Multivariate Prediction of Life-Satisfaction
Control Variables
b-Coefficients
ALL
NBY>HHY
HHY>NBY
pc Neighbourhood Income (log)
0.21*
0.36*
~0
per capita Household Income (log)
0.47**
0.53**
0.39**
Number of Observations
12,251
6,596
5,671
R²
0.1
0.1
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.
March 29, 2007
G. Knies/ SOEP & CMPO
4. Measurement of Relative Deprivation
Compared to others I did not achieved
what I deserve
All
totally agree
HHY>
NBY
NBY>
HHY
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
100
100
100
Total
March 29, 2007
G. Knies/ SOEP & CMPO
Ordered Probit Results
NBY
0.05
HHY
0.38**
N
12,145
Pseudo R²
0. 04
4. Interactions 1999
Happiness Model
Control Variables
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
0.1
0.1
0.06
0.1
R²
March 29, 2007
G. Knies/ SOEP & CMPO
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
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 theory wrong?
Are not all neighbours relevant?
Is the neighbourhood scale inappropriate?
March 29, 2007
G. Knies/ SOEP & CMPO
Definitions: Income Measures
Income 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 owneroccupied housing
+
+
asset income flows
+ (assumed)
+
sick payments
+ (assumed)
/
+
/
+ (assumed)
/
income of non-profit organisations
refunds from health insurers
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 components
Per capita incomes:
HHY/HH size = Σ NB HHY/ NB population
March 29, 2007
G. Knies/ SOEP & CMPO