New Economics Papers
on Economics of Happiness
Issue of 2007‒10‒06
two papers chosen by

  1. Is Well-Being U-Shaped over the Life Cycle? By David G. Blanchflower; Andrew J. Oswald
  2. Job Satisfaction and Co-worker Wages: Status or Signal? By Andrew E. Clark; Nicolai Kristensen; Niels Westergård-Nielsen

  1. By: David G. Blanchflower (Dartmouth College and IZA); Andrew J. Oswald (University of Warwick and IZA)
    Abstract: We explore the idea that happiness and psychological well-being are U-shaped in age. The main difficulty with this argument is that there are likely to be omitted cohort effects (earlier generations may have been born in, say, particularly good or bad times). First, using data on 500,000 randomly sampled Americans and West Europeans, the paper designs a test that controls for cohort effects. A robust U-shape is found. Ceteris paribus, a typical individual’s well-being reaches its minimum - on both sides of the Atlantic and for both males and females - in middle age. We demonstrate this with a quadratic structure and non-parametric forms. Second, some evidence is presented for a U-shape in developing countries and the East European nations. Third, using measures that are closer to psychiatric scores, we document a comparable well-being curve across the life course in two other data sets: (i) in GHQ-N6 mental health levels for a sample of 16,000 Europeans, and (ii) in reported depression and anxiety among approximately 1 million U.K. citizens. Fourth, we document occasional apparent exceptions, particularly in developing nations, to the U-shape. Fifth, we note that American male birth cohorts seem to have become progressively less happy with their lives. Our paper’s results are based on regression equations in which other influences, such as demographic variables and income, are held constant.
    Keywords: happiness, aging, well-being, GHQ, cohorts
    JEL: D1 I3
    Date: 2007–09
  2. By: Andrew E. Clark (Paris School of Economics, CCP, Aarhus School of Business and IZA); Nicolai Kristensen (Aarhus School of Business, CIM and CCP); Niels Westergård-Nielsen (Aarhus School of Business, CCP and IZA)
    Abstract: This paper uses matched employer-employee panel data to show that individual job satisfaction is higher when other workers in the same establishment are better-paid. This runs contrary to a large literature which has found evidence of income comparisons in subjective well-being. We argue that the difference hinges on the nature of the reference group. We here use co-workers. Their wages not only induce jealousy, but also provide a signal about the worker’s own future earnings. Our positive estimated coefficient on others’ wages shows that this positive future earnings signal outweighs any negative status effect. This phenomenon is stronger for men, and in the private sector.
    Keywords: job satisfaction, co-workers, comparison income, wage expectations, tournaments
    JEL: C23 C25 D84 J28 J31 J33
    Date: 2007–09

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