The Effect of Income on Immigrants’ Happiness

Rocio Calvo, Boston College
Sebastian Vollmer, University of Göttingen
Kenneth Harttgen, Swiss Federal Institute of Technology (ETH)

Neoclassical micro economic theory suggests that international migration is an individual decision motivated by income maximization. Net of immigration costs, potential immigrants choose to move where they anticipate they can be most productive and obtain the highest economic return. According to this theory, immigrants’ well-being would be determined by how well they fare economically, which should improve with time spent in the destination country. The purpose of this study is to examine this question. Using a representative sample of immigrants from the German Socio-Economic Panel (G-SOEP) from 1994 to 2011, we investigate whether immigrants obtained more happiness from their income than comparable native-born individuals, even as they spent time in the host country. Because not all immigrants enter in the same segment market of the destination country, we also examine whether immigrants obtained more happiness from their income than comparable native-born individuals as they navigated the German labor market and experienced different positions in the income distribution.