infonet-economy

Much progress has been made in recent years on developing and applying a direct measure of utility using survey questions on subjective well-being. In this paper we explore whether this new type of measurement can be fruitfully applied to the study of interdependent utility in general, and altruism between parents and adult children who moved away from home in particular. We introduce an appropriate econometric methodology and, using data from the German SocioEconomic Panel for the years 2000-2004, find that the parents’ self-reported happiness depends positively on the happiness of their adult children. A one standard deviation move in the child’s happiness has the same effect as a 45 percent move in household income.