Further evidence on the individual welfare function of income: An empirical investigatiion in The Netherlands

Abstract

The theoretical foundation for this paper has been laid [3]. One of the theory there exposed, is that every individual can evaluate his welafre position with respect to his income level on a bounded scale. A description of this evaluation may be given by the individual welfare function of income. One of the outcomes of the theory is that under fairly general assumptions the individual welfare function will tend to a lognormal distribution function Λ(.; μ, σ). In this paper we estimated the welfare function of this income on the basis of a survey by the Consumer Union in The Netherlands. Besides yielding further evidence on the Belgian results, we handled a much finer social differentation; accordingly, we could measure the preference drift and the influence of the family size on individual welfare for much finer specified social subgroups. Finally, we compared our new results for the Dutch survey with the results of the Belgian survey on which we reported in this journal in 1971.