Money, Well-Being, and Loss Aversion: Does an Income Loss Have a Greater Effect on Well-Being Than an Equivalent Income Gain?

Boyce, Christopher J. and Wood, Alex M. and Banks, James and Clark, Andrew E. and Brown, Gordon D. A. (2013) Money, Well-Being, and Loss Aversion: Does an Income Loss Have a Greater Effect on Well-Being Than an Equivalent Income Gain? Psychological Science, 24 (12). pp. 2557-2562. ISSN 1467-9280. (doi:https://doi.org/10.1177/0956797613496436) (The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided)

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Official URL
http://dx.doi.org/10.1177/0956797613496436

Abstract

Higher income is associated with greater well-being, but do income gains and losses affect well-being differently? Loss aversion, whereby losses loom larger than gains, is typically examined in relation to decisions about anticipated outcomes. Here, using subjective-well-being data from Germany (N = 28,723) and the United Kingdom (N = 20,570), we found that losses in income have a larger effect on well-being than equivalent income gains and that this effect is not explained by diminishing marginal benefits of income to well-being. Our findings show that loss aversion applies to experienced losses, challenging suggestions that loss aversion is only an affective-forecasting error. By failing to account for loss aversion, longitudinal studies of the relationship between income and well-being may have overestimated the positive effect of income on well-being. Moreover, societal well-being might best be served by small and stable income increases, even if such stability impairs long-term income growth.

Item Type: Article
Uncontrolled keywords: loss aversion, money, income, happiness, subjective well-being
Subjects: H Social Sciences
Divisions: Faculties > Social Sciences > Kent Business School
Faculties > Social Sciences > Kent Business School > Industrial Relations/HRM
Depositing User: Tracey Pemble
Date Deposited: 21 Sep 2018 11:28 UTC
Last Modified: 24 Sep 2018 11:47 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/69191 (The current URI for this page, for reference purposes)
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