The relationship between perceived economic standing and happiness

ABSTRACT

We examine the importance of perception in the relationship between income and happiness. Using Icelandic data, we show that people’s perception of their economic standing is more telling of their happiness than their actual income. We find a stronger association between happiness and a negative perception of one’s economic standing than happiness and a positive perception.

KEYWORDS:

• Perceived economic standing
• income
• happiness
• relative income

JEL CLASSIFICATION:

• D60
• D31

Acknowledgments

Provision of data from the Directorate of Health in Iceland is gratefully acknowledged, as well as funding from the Icelandic Student Innovation Fund (grant no. 195999-0091), The

Icelandic Research Fund (grant no. 130611-051), and The University of Iceland Research

Fund (grant no. 1600-16203).

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

This work was supported by the The Icelandic Student Innovation Fund [195999-0091]; The University of Iceland Research Fund [1600-16203]; The Icelandic Research Fund [130611-051].