Personality and the marginal utility of income: Personality interacts with increases in household income to determine life satisfaction

Citation

Boyce CJ & Wood AM (2011) Personality and the marginal utility of income: Personality interacts with increases in household income to determine life satisfaction. Journal of Economic Behavior and Organization, 78 (1-2), pp. 183-191. https://doi.org/10.1016/j.jebo.2011.01.004

Abstract
Economics implicitly assumes that the marginal utility of income is independent of an individual's personality. We show that this is wrong. This is the first demonstration that there are strong personality-income interactions. In an analysis of 13,615 individuals over 4-years we show that individuals who have high levels of conscientiousness obtain more satisfaction to their lives from increases to their household income. There are strong gender differences and women that are open-to-experiences, introverted or neurotic get lower satisfaction from household income increases. Our findings have important implications for the use of financial incentives to influence behavior. In the future, public policy may benefit from being personality-specific.

Keywords
Life satisfaction; Personality; GSOEP; Marginal utility of income; Self-control; Happiness; Well-being

Journal
Journal of Economic Behavior and Organization: Volume 78, Issue 1-2

People

Dr Christopher Boyce

Honorary Research Fellow, SMS Management and Support