Financial Satisfaction from an Intra-Household Perspective

Abstract

We address personal financial satisfaction from an intra-household perspective. Our purpose is twofold. First, we seek to contrast the procedural utility hypothesis, whereby different sources of income may contribute differentially to personal income satisfaction. In particular, we compare labour earnings and non-labour income. Second, we set out to test the hypothesis of relative income within the household. Does the income level of one individual regarding other members of the same household matter in personal income satisfaction? These two hypotheses are relevant to policy-making regarding subsidies, taxation and active labour market programmes. We use data for Spain and Denmark in the European Community Household Panel (ECHP). In general terms, and for both countries, our results seem to confirm both the procedural hypothesis and the relative income hypothesis. Labour income contributes more to individual financial satisfaction than non-labour income for both household partners (men and women) in the two countries. However, the effect of an individual’s own share of labour income relative to the partner’s differs considerably both between men and woman and between the two countries.