New Economics Papers
on Economics of Happiness
Issue of 2008‒04‒21
eleven papers chosen by

  1. Multidimensional Poverty Measures from an Information Theory Perspective By Maria Ana Lugo; Esfandiar Maasoumi
  2. Life Expectancy and Human Capital Investments: Evidence From Maternal Mortality Declines By Seema Jayachandran; Adriana Lleras-Muney
  3. The Power of Positional Concerns By Benno Torgler; Sascha L. Schmidt; Bruno S. Frey
  4. The effects of economic freedom components on economic growth: an analysis with a threshold model By Rami Abdelkafi; Hatem Derbel
  5. The Prevention of Lifestyle-Related Chronic Diseases: an Economic Framework By Franco Sassi; Jeremy Hurst
  6. "How Is Suicide Different in Japan?" By Joe Chen; Yun Jeong Choi; Yasuyuki Sawada
  7. A Closer Look at the Relationship Between Life Expectancy and Economic Growth By Azomahou, Théophile; Boucekkine, Raouf; Diene, Bity
  8. Money and Success –Sibling and Birth-Order Effects on Positional Concerns By Lampi, Elina; Nordblom, Katarina
  9. Do Markets Promote Prosocial Behavior? Evidence from the Standard Cross-Cultural Sample. By E. Anthon Eff; Malcolm M. Dow
  10. "Suicide and Life Insurance" By Joe Chen; Yun Jeong Choi; Yasuyuki Sawada
  11. Understanding Poverty among the Elderly in India: Implications for Social Pension Policy By Pal, Sarmistha; Palacios, Robert

  1. By: Maria Ana Lugo (University of Oxford); Esfandiar Maasoumi (Southern Methodist University)
    Abstract: This paper proposes to use an information theory approach to the design of multidimensional poverty indices. Traditional monetary approaches to poverty rely on the strong assumption that all relevant attributes of well-being are perfectly substitutable. Based on the idea of the essentiality of some attributes, scholars have recently suggested multidimensional poverty indices where the existence of a trade-off between attributes is relevant only for individuals who are below a poverty threshold in all of them (Bourguignon and Chakravarty 2003, Tsui 2002). The present paper proposes a method which encompasses both approaches and, moreover, it opens the door to an intermediate position which allows, to a certain extent, for substitution of attributes even in the case in which one or more (but not all) dimensions are above the set threshold. An application using individual well-being data from Indonesian households in 2000 is presented in order to compare the results under the different approaches.
    Keywords: Multidimensional Poverty, Information Theory
    JEL: I32 I10 C43
    Date: 2008
  2. By: Seema Jayachandran; Adriana Lleras-Muney
    Abstract: Longer life expectancy should encourage human capital accumulation, since a longer time horizon increases the value of investments that pay out over time. Previous work has been unable to determine the empirical importance of this life-expectancy effect due to the difficulty of isolating it from other effects of health on education. We examine a sudden drop in maternal mortality risk in Sri Lanka between 1946 and 1953, which creates a sharp increase in life expectancy for school-age girls without contemporaneous effects on health, and which also allows for the use of boys as a control group. Using additional geographic variation, we find that the 70% reduction in maternal mortality risk over the sample period increased female life expectancy at age 15 by 4.1%, female literacy by 2.5%, and female years of education by 4.0%.
    JEL: I10 I20 O15
    Date: 2008–04
  3. By: Benno Torgler; Sascha L. Schmidt; Bruno S. Frey
    Abstract: People care a great deal about their relative economic position and not solely about their absolute economic position. However, behavioral evidence is rare. This paper provides evidence on how the relative income position affects professional sports performances. Our analysis suggests that if a player’s salary is below the average and this difference increases, his performance worsens. Moreover, the larger the income differences, the stronger positional concern effects are observable. We also find that the more the players are integrated, the more evident a relative income effect is. Finally, we find that positional effects are stronger among high performing teams.
    Keywords: Relative income; positional concerns; organizational justice; envy; social comparison; relative derivation; equity theory; prospect theory; loss aversion; performance
    Date: 2008–04
  4. By: Rami Abdelkafi; Hatem Derbel
    Abstract: Several studies show a positive and significant link between economic freedom and economic growth. Based on this result many economists recommend an abrupt and total disengagement of the State from the economic activity. Our objective in this paper is double. Initially, we show that the use of an aggregate index of economic freedom can mask the specificity of the link between the latter and the growth. In a second time, we use the Hansen (2000) method to demonstrate the presence of threshold variables rejecting the linearity of the relation between variables on the entire sample. The GDP per capita and the initial enrollment rate in secondary school divide the sample in two groups of countries characterized by different relations. One of our principal results is that the reduction of the size of the government is not effective in countries having an initial GDP per capita and an enrollment rate in 1990 higher than the thresholds values. This enables us to put into perspective the need for a reduction of the size of the government and to insist on the effectiveness of economic policies in developing countries.
    Keywords: Size of the government, economic freedom, economic growth, threshold model
    JEL: C13 C21 H10 H11 H50 O10
    Date: 2008
  5. By: Franco Sassi; Jeremy Hurst
    Abstract: This paper provides an economic perspective on the prevention of chronic diseases, focusing in particular on diseases linked to lifestyle choices. The proposed economic framework is centred on the hypothesis that the prevention of chronic diseases may provide the means for increasing social welfare, enhancing health equity, or both, relative to a situation in which chronic diseases are simply treated once they emerge. Testing this hypothesis requires the completion of several conceptual and methodological steps. The pathways through which chronic diseases are generated must be identified as well as the levers that could modify those pathways. Justification for action must be sought by examining whether the determinants of chronic diseases are simply the outcome of efficient market dynamics, or the effect of market and rationality failures preventing individuals from achieving the best possible outcomes. Where failures exist, possible preventive interventions must be conceived, whose expected impact on individual choices should be commensurate to the extent of those failures and to the severity of the outcomes arising from them. A positive impact of such interventions on social welfare and health equity should be assessed empirically through a comprehensive evaluation before interventions are implemented. <BR>Le présent rapport appréhende dans une optique économique la question de la prévention des maladies chroniques, en mettant tout particulièrement l'accent sur celles qui sont associées au mode de vie. Le cadre économique proposé repose essentiellement sur l'hypothèse selon laquelle la prévention des maladies chroniques peut permettre d'améliorer le bien-être social ou d'accroître l'équité face à la santé, ou les deux, par rapport à une situation dans laquelle ces maladies sont simplement traitées lorsqu'elles se déclarent. Pour vérifier cette hypothèse, il faut accomplir plusieurs tâches d'ordre conceptuel et méthodologique. Il est nécessaire de cerner le processus qui aboutit à l'apparition des maladies chroniques, ainsi que les moyens susceptibles d'infléchir ce processus. Pour définir l'action à mener dans ce sens, il faut examiner si les déterminants de ces maladies sont simplement issus de la dynamique d'un marché efficient ou s'ils découlent d'une défaillance du marché et d'un défaut de rationalité qui empêchent les individus d'obtenir les meilleurs résultats possibles. Lorsqu'il y a défaillance, il est nécessaire de définir les mesures préventives qui pourraient être prises, mesures dont l'impact attendu sur les choix individuels doit être proportionnel à l'ampleur de cette défaillance et à la gravité des effets qu'elle produit. Il conviendrait d'examiner si ces mesures auront une incidence positive sur le bien-être social et l'équité face à la santé en effectuant une évaluation approfondie à l'aide de données concrètes avant leur application.
    Keywords: prevention, prévention, défaillances de marché
    JEL: H23 H51 I12 I18
    Date: 2008–03–25
  6. By: Joe Chen (Faculty of Economics, University of Tokyo); Yun Jeong Choi (Faculty of Economics, University of Tokyo); Yasuyuki Sawada (Faculty of Economics, University of Tokyo)
    Abstract: In this study, we analyze suicide rates among OECD countries, with particular effort made to gain insight into how suicide in Japan is different from suicides in other OECD countries. Several findings emerged from fixed-effect panel regressions with country-specific time-trends. First, the impacts of socioeconomic variables vary across different gender-age groups. Second, in general, better economic conditions such as high levels of income and higher economic growth were found to reduce the suicide rate, while income inequality increases the suicide rate. Third, the suicide rate is more sensitive to economic factors captured by real GDP per capita, growth rate of real GDP per capita, and the Gini index than to social factors represented by divorce rate, birth rate, female labor participation rate, and alcohol consumption. Fourth, female and elderly suicides are more difficult to be accounted for. Finally, in accordance with general beliefs, Japan's suicide problem is very different from those of other OECD countries. The impact of the socioeconomic variables on suicide is greater in Japan than in other OECD countries; moreover, the empirical result of a significant Gini index in Japan is consistent with individuals' aversion to inequality and relative deprivation, as discussed in the recent literature.
    Date: 2008–04
  7. By: Azomahou, Théophile (UNU-MERIT); Boucekkine, Raouf (CORE, Universite Catholique de Louvain); Diene, Bity (BETA, Universite Louis Pasteur, Strasbourg)
    Abstract: We first provide a nonparametric inference of the relationship between life expectancy and economic growth on an historical data for 18 countries over the period 1820-2005. The obtained shape shows up convexity for low enough values of life expectancy and concavity for large enough values. We then study this relationship on a benchmark model combining perpetual youth" and learning-by-investing. In such a benchmark, the generated relationship between life expectancy and economic growth is shown to be strictly increasing and concave. We finally examine two models departing from perpetual youth" by assuming successively age-dependent earnings and age-dependent survival probabilities. With age-dependent earnings, the obtained relationship is hump-shaped while agedependent survival laws do reproduce the convex-concave shape detected in the prior empirical study.
    Keywords: Life expectancy, economic growth, perpetual youth, age-dependent mortality, nonparametric estimation
    JEL: O41 I20 J10
    Date: 2008
  8. By: Lampi, Elina (Department of Economics, School of Business, Economics and Law, Göteborg University); Nordblom, Katarina (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: Survey data is used to investigate how birth order and having siblings affect positional concerns in terms of success at work and of income. We find that only-children are the most concerned with relative position, but that number of siblings increases the concern among those who grew up together with siblings. Furthermore, people whose parents often compared them with their siblings have stronger positional concerns in general. We find differences depending on whether the issue is relative income or relative successfulness, and that people generally have stronger positional concern in relation to friends, but less so in relation to parents and least in relation to siblings. We also find that younger respondents are far more concerned with relative position than older in all studied situations.<p>
    Keywords: birth order; positional concern; only child; relative income; siblings
    JEL: D31 D63
    Date: 2008–04–18
  9. By: E. Anthon Eff; Malcolm M. Dow
    Abstract: Recent experimental games conducted by ethnographers (Henrich et al. 2004) have shown that groups with higher levels of market integration exhibit higher levels of prosocial behavior. In order to see whether these results are confirmed in a broader ethnographic sample, this paper draws from the Standard Cross-Cultural Sample variables measuring the degree to which a culture seeks to inculcate generosity, honesty, and trust. Using these as dependent variables, models are developed where market-related variables are among the independent variables. The paper uses the methodology developed by Dow (2007) to correct for Galton’s problem, and uses multiple imputation to deal with the problem of missing data. The results fail to confirm a systematic association between generalized prosocial behavior and market integration.
    Keywords: prosocial behavior, multiple imputation, market integration, Galton’s problem
    JEL: R12 F16
    Date: 2008–04
  10. By: Joe Chen (Faculty of Economics, University of Tokyo); Yun Jeong Choi (Faculty of Economics, University of Tokyo); Yasuyuki Sawada (Faculty of Economics, University of Tokyo)
    Abstract: In this paper, we investigate the nexus between life insurance and suicide behavior using OECD cross-country data from 1980 to 2002. Through semiparametric instrumental variable regressions with fixed effects, we find that for the majority of observations, there exists a positive relationship between suicide rate and life insurance density (premium per capita). Since life insurance policies pay death benefits even in suicide cases after the suicide exemption period, the presence of adverse selection and moral hazard suggests an incentive effect that leads to this positive relationship. The novelty of our analysis lies in the use of cross-country variations in the length of the suicide exemption period in life insurance policies as the identifying instrument for life insurance density. Our results provide compelling evidence suggesting the existence of adverse selection and moral hazards in life insurance markets in OECD countries.
    Date: 2008–04
  11. By: Pal, Sarmistha (Brunel University); Palacios, Robert (World Bank)
    Abstract: The Government of India is implementing a new policy which dramatically increases funding for a cash transfer program targeted to the poor elderly. The expansion of this ‘social pension’ in terms of coverage and benefit levels is taking place with little understanding of poverty among India’s elderly or its determinants. This paper finds that households with elderly members do not have higher poverty rates than non-elderly households. This result is robust under various measures that take into account the size and composition of households. Separate evidence suggests that part of the explanation for this phenomenon is that the poor have higher mortality rates and are therefore underrepresented. This explanation has important implications for social pension policy and suggests that programs that reduce elderly mortality may actually increase the relative poverty levels of the elderly.
    Keywords: old age poverty, household demographic composition, adjusted poverty indices, elderly contribution, survivorship bias
    Date: 2008–04

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.