nep-hap New Economics Papers
on Economics of Happiness
Issue of 2008‒04‒12
nine papers chosen by
Viviana Di Giovinazzo
University of Milano-Bicocca

  1. Lost in Transition : Life Satisfaction on the Road to Capitalism By Richard A. Easterlin
  2. Life Satisfaction and Economic Conditions in East and West Germany Pre- and Post-Unification By Richard A. Easterlin; Anke C. Zimmermann
  3. Clash of Career and Family: Fertility Decisions after Job Displacement By del Bono, Emilia; Weber, Andrea; Winter-Ebmer, Rudolf
  4. The evolution of World inequality in Well-being By Koen Decancq; André Decoster; Erik Schokkaert
  5. Ideology By Bénabou, Roland
  6. Responsibility, Well-Being, Information, and the Design of Distributive Policies. By Frank Vandenbroucke
  7. Factor Analysis vs Fuzzy Sets Theory: Assessing the Influence of Different Techniques on Sen's Functioning Approach. By Sara Lelli
  8. Science, Technology and Development: Emerging concepts and visions By Soete, Luc
  9. Parental Preference, Heterogeneity, and Inequality Within the Household By Tekabe Ayalen

  1. By: Richard A. Easterlin
    Abstract: In the transition from socialism to capitalism in Eastern Europe life satisfaction has followed the V-shaped pattern of GDP but failed to recover commensurately. In general, increased satisfaction with material living levels has occurred at the expense of decreased satisfaction with work, health, and family life. Disparities in life satisfaction have increased markedly with those hardest hit being the less educated and persons over age 30; women and men have suffered about equally. The asymmetric response of life satisfaction to decreases in GDP in transition countries and increases in GDP in non-transition countries is arguably due to loss aversion.
    Keywords: Happiness, transition, capitalism, socialism, loss aversion
    JEL: I31 P5 P27 D60
    Date: 2008
  2. By: Richard A. Easterlin; Anke C. Zimmermann
    Abstract: Economic disruption in East Germany at the time of unification resulted in a noticeable drop in life satisfaction. By the late 1990s East Germany's life satisfaction had recovered to about its 1990 level, and its shortfall relative to West Germany was slightly less than that before unification. In West Germany life satisfaction was fairly constant before unification, but subsequently trended moderately downward, with Turkish life satisfaction declining noticeably relative to Germans. Changes in life satisfaction in East and West Germany both for Germans and foreigners are most closely associated with relative income variables, not absolute income.
    Keywords: Life satisfaction, happiness, relative income, income satisfaction, transition economies
    JEL: D31 D60 I31 O52 P3
    Date: 2008
  3. By: del Bono, Emilia; Weber, Andrea; Winter-Ebmer, Rudolf
    Abstract: In this paper we investigate how fertility decisions respond to unexpected career interruptions, which occur as a consequence of job displacement. Using an event study approach we compare the birth rates of displaced women with those of women unaffected by job loss after establishing the pre-displacement comparability of these groups. Our results reveal that job displacement reduces average fertility by 5 to 10% in both the short and medium term (3 and 6 years) and that these effects are largely explained by the response of white-collar women. Using an instrumental variable approach we provide evidence that the reduction in fertility is not due to the income loss generated by unemployment but arises because displaced workers undergo a career interruption. These results are interpreted in the light of a model in which the rate of human capital accumulation slows down after the birth of a child and all specific human capital is destroyed upon job loss.
    Keywords: fertility; human capital; plant closing; unemployment
    JEL: J13 J24 J64 J65
    Date: 2008–02
  4. By: Koen Decancq; André Decoster; Erik Schokkaert
    Abstract: In this paper we investigate the evolution of the inequality in well-being across different countries between 1975 and 2000. We treat well-being as a multidimensional concept focusing on three important dimensions of life: standard of living, health and education. Inequality in the three dimensions shows a different trend between 1975 and 2000. We propose a flexible measure of well-being and use the tools offered by the recent literature on multidimensional inequality measurement to quantify the evolution of overall intercountry well-being inequality. The empirical results are nuanced, and sensitive to different normative choices on the trade-offs between the different dimensions. In particular the concave transformation of income turns out to be decisive for the evolution of world inequality in well-being.
    Keywords: Multidimensional Inequality Measurement, Index of Well-being, Inter-country Inequality.
    JEL: D31 D63 I31 O50
    Date: 2008–03
  5. By: Bénabou, Roland
    Abstract: I develop a model of ideologies as collectively sustained (yet individually rational) distortions in beliefs concerning the proper scope of governments versus markets. In processing and interpreting signals of the efficacy of public and market provision of education, health insurance, pensions, etc., individuals optimally trade off the value of remaining hopeful about their future prospects (or their children's) versus the costs of misinformed decisions. Because these future outcomes also depend on whether other citizens respond to unpleasant facts with realism or denial, endogenous social cognitions emerge. Thus, an equilibrium in which people acknowledge the limitations of interventionism coexists with one in which they remain obstinately blind to them, embracing a statist ideology and voting for an excessively large government. Conversely, an equilibrium associated with appropriate public responses to market failures coexists with one dominated by a laissez-faire ideology and blind faith in the invisible hand. With public-sector capital, this interplay of beliefs and institutions leads to history-dependent dynamics. The model also explains why societies find it desirable to set up constitutional protections for dissenting views, even when ex-post everyone would prefer to ignore unwelcome news.
    Keywords: cognitive dissonance; ideology; institutions; laissez-faire; political economy; psychology; statism; wishful thinking
    JEL: D72 D83 H11 P16 Z1
    Date: 2008–03
  6. By: Frank Vandenbroucke
    Abstract: The model developed in this paper admits a systematic discussion of the normative rationale behind the use of two distributive instruments: negative income taxation, creating an unconditional basic income, on the one hand and wage subsidies on the other hand. The model integrates two opposite conceptions of personal responsibility (whether or not we are responsible for our propensity to work in the labour market) into a single framework. Thus we can compare these conceptions systematically, and define conditions for practical convergence between the policies they indicate. This framework also illustrates how optimal taxation theory may proceed when utilities are considered ordinal and interpersonally not comparable. This requires the definition of an objective notion of individual well-being. I incorporate "time for non-market activity" in the definition of well-being. The model shows how alternative choices with regard to the inclusion and weighing of "time for non-market activity" in the Rawlsian basket of primary goods affect the prescription of policies. More generally, it shows how alternative conceptions of well-being affect the posttransfer reward scheme the government proposes. The model is used to illustrate the idea, defended by Fleurbaey et al., that responsibility-sensitive egalitarian justice imposes a principle of natural reward. Given the simplifying assumptions of the model, I will establish, in the second-best regimes and excluding corner solutions, for each conception of responsibility and set of instruments, a one-to-one correspondence between principles of reward, on the one hand, and conceptions of individual well-being on the other hand. Hence, given these assumptions and conditions, there is a unique definition of well-being which yields a neutral principle of reward, i.e. there is a unique "neutral" official conception of the citizens’ individual well-being. The model is then used to study the "egalitarian earnings subsidy scheme" proposed by White (1999) and to assess a related discussion between White (1997) and Van Parijs (1997) on basic income and the principle of reciprocity. According to White the principle of reciprocity implies the use of wage subsidies and the rejection of basic income. The model shows that basic income and a wage subsidy can be complementary instruments. However, under certain conditions, a neutral principle of reward demands that earned income taxation only be used to fund wage subsidies, so that a basic income has to be funded (possibly together with other expenditures) by a capital income tax on available "personal dividends".
    Date: 2008–03
  7. By: Sara Lelli
    Abstract: This paper explores a couple of specific operational interpretations of Sen's approach in view of assessing the extent to which the results originated by the implementation of Sen's concepts are influenced by the choice of the specific technique. By means of a survey based on a representative sample of Belgian individuals, seven achieved functioning's are identified via each technique and subsequently confronted. To structure the information and to facilitate comparisons, standard multivariate analysis is performed, while at the same time considering in more detail the sub-group of the most deprived individuals. In this way, a substantial accordance - yet no perfect equivalence - is uncovered in the general patterns of functioning's' achievements.
    Date: 2008–03
  8. By: Soete, Luc (UNU-MERIT)
    Abstract: This paper analyzes the impact of globalization on the allocation of public and private resources for research, knowledge creation and diffusion. We argue that while the concentration of research investments remains in a relatively small number of rich countries and regions, the focus of such activities is increasingly global. From this perspective the international business community is becoming increasingly concerned about the sustainability of its long term growth based on relatively low growth at the high end of the market in comparison to rising demand amongst lower income groups, located primarily in developing countries. Building on this analysis, the paper outlines a vision of innovation for development that could lead to a truly new research programme for innovation studies and the development of successful innovation-for-development strategies.
    Keywords: Economic Development, Science and Technology, Research and Development, Diffusion of Technology, Investment, Innovation, Developing Countries
    JEL: O14 O16 O19 O25 O32 O33
    Date: 2008
  9. By: Tekabe Ayalen
    Abstract: Given siblings are heterogeneous in their genetic endowment, we strive to model the implication of parental behaviour for inequality among siblings. Children are posited as passive recipients of human capital inputs from their parents. Unless there is a significant difference in genetic endowment among siblings, parents tend to reinforce the impact of genetic endowment by investing more in those who are likely to earn higher any ways. However, introducing uncertainty in earnings dilutes the above results. Parents’ decision regarding the allocation of human capital resources among siblings takes a different tune when the process involves the distribution of physical capital as well
    Date: 2008–03

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