Author Description

This study examines possible positive spillovers and negative consumption externalities of the average income in a geographic area (locality income) on individuals' life satisfaction, focusing on two issues. The first is whether the effect of locality income on life satisfaction is sensitive to the scale of geographic units. The second is how the choice of control variables influences the estimated effect of locality income. The analysis of 142,780 survey respondents nested within 31,000 immediate neighbourhoods, 5,000 local communities, and 430 municipalities suggests that the positive spillovers of locality income are stronger in immediate neighbourhoods and local communities than at the municipality level. The positive association between locality income and life satisfaction to a large extent is attributable to the selective geographic concentration of individuals by income, marital status, and home ownership. Although the analysis does not rule out the existence of negative consumption externalities, their effect, if any, does not override the positive spillovers.