Mental Accounts: How Our Perception of Assets and Debt Affects Happiness

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Mental Accounts: How Our Perception of Assets and Debt Affects Happiness

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Title: Mental Accounts: How Our Perception of Assets and Debt Affects Happiness
Author: Bhattacharya, Alok
Advisor: Ball, Richard J.
Department: Haverford College. Dept. of Economics
Type: Thesis (B.A.)
Issue Date: 2011
Abstract: This paper investigates the validity of ‘mental accounting,’ specifically by determining whether individuals view an additional dollar in total household assets as a dollar less in total household debt. Furthermore, the analysis in this paper focuses on how an individual’s perception of this assets-debt relationship affects their subjective well-being, i.e. their happiness. This paper uses findings from previous studies to attempt to create a multivariable regression that will determine the nature of this relationship, controlling for other factors and isolating the sample size to those individuals who are the equivalents of household heads. In this analysis, the results demonstrate that the asset-debt relationship does not hold, supporting the theoretical background of mental framing in its explanation of how individuals view their assets and debt differently. The analysis also examines the difference in the assets-debt relationship with happiness between males and females, finding it unlikely to be different for assets, debt and household disposable income for males and females in the sample. The statistical and economic significance of physical health on subjective well-being, as well as the quadratic relationship between age and subjective well-being (as found in previous studies), is also explored in this analysis.
Subject: Debt -- Psychological aspects
Subject: Debt -- Psychological aspects -- Sex differences
Subject: Assets (Accounting) -- Psychological aspects
Subject: Happiness -- Economic aspects
Subject: Assets (Accounting) -- Psychological aspects -- Sex differences
Terms of Use: http://creativecommons.org/licenses/by-nc/3.0/us/
Permanent URL: http://hdl.handle.net/10066/6931

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Citation

Bhattacharya, Alok. "Mental Accounts: How Our Perception of Assets and Debt Affects Happiness". 2011. Available electronically from http://hdl.handle.net/10066/6931.

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