New Economics Papers
on Economics of Happiness
Issue of 2008‒03‒15
eight papers chosen by

  1. How Unilateral Divorce Affects Children By Cáceres-Delpiano, Julio; Giolito, Eugenio P.
  2. Economic Well-Being and Poverty among the Elderly: An Analysis Based on a Collective Consumption Model By Cherchye, Laurens; De Rock, Bram; Vermeulen, Frederic
  3. International Evidence on Well-being By Blanchflower, David G.
  4. Why Does Unemployment Hurt the Employed? Evidence from the Life Satisfaction Gap between the Public and the Private Sector By Luechinger, Simon; Meier, Stephan; Stutzer, Alois
  5. Are Lone Mothers Responsive to Policy Changes? The Effects of a Norwegian Workfare Reform on Earnings, Education, and Poverty By Magne Mogstad and Chiara Pronzato
  6. Conversion Efficiency as a Complementing Measure of Welfare in Capability Space By Binder, Martin; Broekel, Tom
  7. Income Distribution, Market Structure, and Individual Welfare By Tarasov, Alexander
  8. Fertility decline, baby boom and economic growth By Murphy, Kevin M; Simon, Curtis; Tamura, Robert

  1. By: Cáceres-Delpiano, Julio (Universidad Carlos III, Madrid); Giolito, Eugenio P. (Universidad Carlos III, Madrid)
    Abstract: Using U.S. Census data for the years 1960-1980, we study the impact of unilateral divorce on outcomes of children (age 6-15) and their mothers. We find that the reform increased mothers’ divorce, decreased family income and increased the fraction of mothers below the poverty line. For children, we find not only negative results on investment, measured as the probability that a child goes to a private school, but also on child outcomes, measured by the likelihood of children aged 0-4 being held back in school at the time of the reform. We then analyze outcomes of the same cohorts of children 10 years later, by studying young men and women aged 16-25 using the 1970-1990 U.S. Census. We find an increase in marginality for these cohorts, measured as the probability of living in an institution (men) or the probability of being below the poverty line (women). We find that the impact in outcomes is particularly important for black children and young adults.
    Keywords: unilateral divorce, child outcomes
    JEL: J12 J13
    Date: 2008–02
  2. By: Cherchye, Laurens (Catholic University of Leuven); De Rock, Bram (ECARES, Free University of Brussels); Vermeulen, Frederic (Tilburg University)
    Abstract: We apply the collective consumption model of Browning, Chiappori and Lewbel (2006) to analyse economic well-being and poverty among the elderly. The model focuses on individual preferences, a consumption technology that captures the economies of scale of living in a couple, and a sharing rule that governs the intra-household allocation of resources. The model is applied to a time series of Dutch consumption expenditure surveys. Our empirical results indicate substantial economies of scale and a wife’s share that is increasing in total expenditures. We further calculated poverty rates by means of the collective consumption model. Collective poverty rates of widows and widowers turn out to be slightly lower than traditional ones based on a standard equivalence scale. Poverty among women (men) in elderly couples, however, seems to be heavily underestimated (overestimated) by the traditional approach. Finally, we analysed the impact of becoming a widow(er). Based on cross-sectional evidence, we find that the drop (increase) in material well-being following the husband’s death is substantial for women in high (low) expenditure couples. For men, the picture is reversed.
    Keywords: collective model, intra-household allocation, indifference scales, economies of scale, poverty
    JEL: D11 D12 D13 D63 I31
    Date: 2008–02
  3. By: Blanchflower, David G. (Bank of England)
    Abstract: National Time Accounting is a way of measuring society's well-being, based on time use. Its explicit form is the U-index, for “unpleasant” or “undesirable”, which measures the proportion of time an individual spends in an unpleasant state. In this paper I review cross-country evidence on happiness and life satisfaction and consider whether these data will likely be replaced by the U-index. I find that first, that there are many similarities. According to both measures happiness is higher for the more educated, for married people, for those with higher income and for whites and lower for the unemployed; is U-shaped in age and un-trended over time in the USA although they are trended up in a number of EU countries and especially so in developing countries. Equivalent results are found using self-reported unhappiness data. Second, there is a large body of data on happiness that is unavailable on the U-index. For example, according to happiness research well-being across nations is lower the higher is the unemployment rate, the current inflation rate and the highest inflation rate in a person's adult life. Higher inequality also lowers happiness. Third, we know little about the predictive power of the U-index. Happiness and life satisfaction data seem able to forecast migration flows. Fourth, happy people are particularly optimistic about the future. Fifth, according to the happiness data the US ranks above France but the U-index suggests the reverse.
    Keywords: happiness, unhappiness, pain, life satisfaction
    JEL: J22
    Date: 2008–02
  4. By: Luechinger, Simon (University of Zurich); Meier, Stephan (Federal Reserve Bank of Boston); Stutzer, Alois (University of Basel)
    Abstract: High rates of unemployment entail substantial costs to the working population in terms of reduced subjective well-being. This paper studies the importance of individual economic security, in particular job security, in workers’ well-being by exploiting sector-specific institutional differences in the exposure to economic shocks. Public servants have stricter dismissal protection and face a lower risk of their organization’s bankruptcy than private sector employees. The empirical results for individual panel data for Germany and repeated cross-sectional data for the United States and the European Union show that the sensitivity of subjective well-being to fluctuations in unemployment rates is much lower in the public sector than in the private. This suggests that increased economic insecurity constitutes an important welfare loss associated with high general unemployment.
    Keywords: unemployment, life satisfaction, job security, public sector
    JEL: E24 I31 J30 J45 J64
    Date: 2008–03
  5. By: Magne Mogstad and Chiara Pronzato (Statistics Norway)
    Abstract: The generous Nordic model of welfare is commonly viewed as an exceptional success both in terms of equality and economic growth. However, it has recently become evident that subgroups of the population with weak labour market attachment and high welfare dependency, such as lone mothers, were vastly overrepresented among the poor. This motivated a workfare reform of the Norwegian welfare system for lone mothers; activity requirements were introduced, time limits imposed, and benefit levels raised. To evaluate the welfare reform we introduce an estimator that, unlike the much used difference-in-difference approach, accounts for the fact that policy changes are typically phased in gradually rather than coming into full effect at once. We find that the workfare reform did not only increase earnings and education as well as lower welfare caseloads and by this route ease the financial burden of the government, but also reduced poverty.
    Keywords: Welfare reform; lone mothers; difference-in-difference; workfare; activity requirements; time limits; earnings; education; poverty
    JEL: C23 I32 I38 J00
    Date: 2008–03
  6. By: Binder, Martin; Broekel, Tom
    Abstract: In the capability literature, studies on the empirical measurement in the functionings space are abundant and a few studies even measure capability to function. We suggest adopting a third measure of welfare relevant to economists, namely the "conversion efficiency" measuring the efficiency with which individuals convert their resources into achieved functioning. We use a nonparametric efficiency procedure and construct such a measure for a basket of basic functioning achievement, using data from the British Household Panel Survey (BHPS).
    Keywords: conversion efficiency; welfare measurement; robust nonparametric efficiency analysis; functioning production
    JEL: I12 I31 R15 I32
    Date: 2008–03–09
  7. By: Tarasov, Alexander
    Abstract: This paper explores how income distribution influences market structure and affects the economic well-being of different groups. It shows that inequality may be good for the poor via a trickle-down effect operating through entry. I consider a general equilibrium model of monopolistic competition with free entry, heterogenous firms and consumers that share identical but non-homothetic preferences. The general model is solved. The case of two types of consumers, rich and poor, is considered in detail. I show that higher income inequality in the economy can benefit the poor. An increase in the personal income of the rich raises welfare of the poor, while an increase in the fraction of the rich has an ambiguous impact on the poor: welfare of the poor has an inverted U shape as a function of the fraction of the rich. At the same time, an increase in the personal income of the rich together with a decrease in the fraction of the rich keeping the aggregate income in the economy fixed raises the well-being of the poor. I also analyze the effect of changes in market size and entry cost. I show that the rich gain more from an increase in market size and lose more from an increase in the cost of entry than the poor.
    JEL: L11 D31 L13 D43
    Date: 2007–03
  8. By: Murphy, Kevin M; Simon, Curtis; Tamura, Robert
    Abstract: We present new data documenting the secular decline in fertility in the states of the United States, the dramatic convergence in fertility, child schooling, parental schooling, survival probabilities. In addition we document the disparate nature of the Baby Boom in the United States. There were two different regimes, a large Baby Boom and a Small Baby Boom. The large Baby Boom regions also had the smallest increase in child schooling, whereas the small Baby Boom regions had the largest increase in child schooling. We present suggestive evidence that falling mortality risk is strongly positively correlated with falling fertility, rising education levels of parents is strongly negatively related to fetility, and that population density is negatively related to fertility. Finally we show the robust negative correlation of mortality risk on child schooling attainment, and positve correlation of population density and child schooling attainment.
    Keywords: mortality; density; fertility decline; baby boom; economic growth
    JEL: J13 J24 O4
    Date: 2008–03–03

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