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Appears in Collections:Economics Journal Articles
Peer Review Status: Refereed
Title: Money, Well-Being, and Loss Aversion: Does an Income Loss Have a Greater Effect on Well-Being Than an Equivalent Income Gain?
Author(s): Boyce, Christopher J
Wood, Alex M
Banks, James
Clark, Andrew E
Brown, Gordon D A
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Keywords: loss aversion
subjective well-being
Financial security Great Britain
Financial security Germany
Well-being and quality of life Great Britain
Well-being and quality of life Germany
Income distribution Great Britain
Income distribution Germany
Issue Date: Dec-2013
Date Deposited: 23-Oct-2013
Citation: Boyce CJ, Wood AM, Banks J, Clark AE & Brown GDA (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.
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.
DOI Link: 10.1177/0956797613496436
Rights: Publisher policy allows this work to be made available in this repository. Published in Psychological Science December 2013 vol. 24 no. 12 2557-2562 by SAGE. The original publication is available at:

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