nep-hap New Economics Papers
on Economics of Happiness
Issue of 2008‒04‒29
seventeen papers chosen by
Viviana Di Giovinazzo
University of Milano-Bicocca

  1. Why does unemployment hurt the employed?: evidence from the life satisfaction gap between the public and private sectors By Simon Luechinger; Stephan Meier; Alois Stutzer
  2. Happiness and health: two paradoxes By Simone Borghesi; Alessandro Vercelli
  3. Happiness maintenance and asset prices By Antonio Falato
  4. Life Satisfaction in Urban China: Components and Determinants By Song, Lina; Appleton, Simon
  5. Links and Architecture in Village Networks By Krishnan, Pramila; Sciubba, Emanuela
  6. Soap Operas and Fertility: Evidence from Brazil By Chong, Alberto; Duryea, Suzanne; La Ferrara, Eliana
  7. Human development and inequality in the 20th Century : the Mercosur countries in a comparative perspective By Luis Bertola; Maria Camou; Silvana Maubrigades; Natalia Melgar
  8. Obesity and Development Functioning Among Children Aged 2-4 Years By John Cawley; C. Katharina Spieß
  9. Family policies : what does the standard endogenous fertility model tell us ? By Thomas Baudin
  10. Soziale Ungleichheiten beim Schulstart : Empirische Untersuchungen zur Bedeutung der sozialen Herkunft und des Kindergartenbesuchs auf den Zeitpunkt der Einschulung By Jens Kratzmann; Thorsten Schneider
  11. Are the Joneses making you financially vulnerable? By Barnett, Richard C; Bhattacharya, Joydeep; Bunzel, Helle
  12. Life Satisfaction in Urban China: Components and Determinants By Song, Lina; Appleton, Simon
  13. Productivity effects of innovation, stress and social relations. By Rifka Weehuizen; Bulat Sanditov; Robin Cowan
  14. Analysis of Human Development Indicators In Libya By Alrubaie, Falah
  15. Provision of Public Goods in a Federalist Country: Tiebout Competition, Fiscal Equalization, and Incentives for Efficiency in Switzerland By Philippe Widmer; Peter Zweifel
  16. An Analysis to human development indicators in the Arab States By Alrubaie, falah.K.Ali
  17. Family Structure and Income During Childhood and Subsequent Prosocial Behavior in Young Adult By Robert Bandy; Mark Wilhelm

  1. By: Simon Luechinger; Stephan Meier; Alois Stutzer
    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 do 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 ; Job security
    Date: 2008
  2. By: Simone Borghesi; Alessandro Vercelli
    Abstract: This paper aims to establish systematic relationships between the two rapidly growing research streams on the socio-economic determinants of happiness and health. Although they have been pursued quite independently by different communities of researchers, empirical evidence points to very similar underlying causal mechanisms. In particular, in both cases per capita income plays a major role only up to a very low threshold, beyond which relative income and other relational factors become crucial for happiness and health. In addition, we argue that the so-called “paradox of happiness”, extensively discussed in the first research stream, has an empirical counterpart in the decoupling between self-reported happiness and health indexes: while life expectancy grew almost continuously in developed countries after World War II, self reported happiness did not increase and sometimes even decreased. On the basis of these structural analogies, we argue that a process of cross-fertilization between these two research streams would contribute to their development by clarifying the relationship between happiness, health and their determinants. Finally, we observe that the two literatures have converging policy implications: measures meant to reduce poverty and inequality and invest in social and environmental capital may improve both health and happiness of the individuals.
    Keywords: happiness, health, happiness paradox, poverty, inequality, relational goods.
    JEL: D6 I10 I18 I31 O15
    Date: 2007–12
  3. By: Antonio Falato
    Abstract: This paper constructs a simple dynamic asset pricing model which incorporates recent evidence on the influence of immediate emotions on risk preferences. Investors derive direct utility from both consumption and financial wealth and, consistent with the happiness maintenance feature documented by Isen (1999) and others, become more cautious toward their wealth in good times. Mild pro-cyclical changes in risk aversion over wealth cause large pro-cyclical fluctuations in the current price-dividend ratio which, due to general equilibrium restrictions, translate into counter-cyclical variation in the current consumption-wealth ratio and, in turn, in expected future returns. With a realistic consumption growth process and reasonable preference parameters, the model generates a sizable equity premium, a low and stable risk-free rate, volatile and predictable stock returns, and price-dividend and Sharpe ratios in line with the data.
    Date: 2008
  4. By: Song, Lina (University of Nottingham); Appleton, Simon (University of Nottingham)
    Abstract: Survey data from urban China in 2002 show levels of life satisfaction to be low, but not exceptionally so, by international comparison. Many of the determinants of life satisfaction in urban China appear comparable to those for people in other countries. These include, inter alia, unemployment, income, marriage, sex, health and age. Communist Party membership and political participation raise life satisfaction. People appear fairly satisfied with economic growth and low inflation, and this contributes to their overall life satisfaction. There is dissatisfaction over pollution, but this – like job insecurity – does not appear to impact on life satisfaction.
    Keywords: life satisfaction, happiness, economic growth, unemployment, China
    JEL: I31 I38 J18 D63
    Date: 2008–04
  5. By: Krishnan, Pramila; Sciubba, Emanuela
    Abstract: In this paper we test the implications of a model of network formation on data from rural Ethiopia. In contrast to the current literature, we demonstrate the critical role of both number of links and architecture in determining the impact of social networks on outcomes. Social capital matters, but its impact differs by the architecture of the network to which one belongs.
    Keywords: Endogenous network formation; rural institutions; social networks
    JEL: D85 O12 O17 Z13
    Date: 2008–04
  6. By: Chong, Alberto; Duryea, Suzanne; La Ferrara, Eliana
    Abstract: What are the effects of television, and of role models portrayed in TV programs, on individual behavior? We focus on fertility choices in Brazil, a country where soap operas (novelas) portray families that are much smaller than in reality. We exploit differences in the timing of entry into different markets of Rede Globo, the network that has an effective monopoly on novelas production in this country. Using Census data for the period 1970-1991, we find that women living in areas covered by the Globo signal have significantly lower fertility. The effect is strongest for women of lower socioeconomic status and for women in the central and late phases of their fertility cycle, consistent with stopping behavior. The result is robust to placebo treatments and does not appear to be driven by selection in Globo entry. Finally, we provide suggestive evidence that novelas, and not just television, affected individual choices. First, people living in areas covered by the signal were more likely to name their children after novela characters. Second, entry of a network that relied on imported shows did not have a significant impact on fertility.
    Keywords: development; fertility; television
    JEL: J13 O12
    Date: 2008–04
  7. By: Luis Bertola; Maria Camou; Silvana Maubrigades; Natalia Melgar
    Abstract: This article is in line with the United Nations attempts to approach human development in wider terms than per capita GDP, and in line with an ever lively debate on the historical standard of living and on the role of inequality in development. We focus on three Mercosur countries (Argentina, Brazil and Uruguay) and we view them in comparison with four core countries (France, Germany, USA and UK) along the 20th Century. The paper makes different attempts to construct diverse indices and to change the weights of their different components in order to better explain human development in different periods. A contribution of the paper, so long limited to Uruguay and the USA, is to adjust the historical human development index by inequality measures for all of its components. The results show that Argentine started to diverge, even in human development, at early stages of the 20th Century; that Uruguay diverged from the mid-century and that Brazil continued to tighten the gap up to 1980, diverging afterwards without being able to come close to the levels of the core countries. Total inequality in Uruguay and USA showed similar levels and trends: it decreased until the 1950s, and increased afterwards to similar levels. While inequality affects human development within both countries, it doesn’t help to understand the differences between them, due to the mentioned similarity of the Gini-coefficients.
    Keywords: Human development, Education, Life expectancy, Inequality, Catching-up, Domestic capabilities
    JEL: N36 N56 N76 N96 O15 Q17
    Date: 2008–04
  8. By: John Cawley; C. Katharina Spieß
    Abstract: In developed countries, obesity tends to be associated with worse labor market outcomes. One possible reason is that obesity leads to less human capital formation early in life. This paper investigates the association between obesity and the developmental functioning of children at younger ages (2-4 years) than ever previously examined. Data from the German Socio-Economic Panel Study are used to estimate models of developmental functioning in four critical areas (verbal skills, activities of daily living, motor skills, and social skills) as a function of various measures of weight (including BMI and obesity status) controlling for various child and family characteristics. The findings indicate that, among boys, obesity is a significant risk factor for lagged development in verbal skills, social skills, and activities of daily living. Among girls, weight generally does not have a statistically significant association with these developmental outcomes. Further investigations show that the correlations exist even for those preschool children who spend no time in day care, which implies that the correlation between obesity and developmental functioning cannot be due to discrimination by teachers, classmates, or even day care providers.
    Keywords: Obesity, human capital, children, child development, Germany, gender
    JEL: I12 J24
    Date: 2008
  9. By: Thomas Baudin (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, Ecole d'économie de Paris - Paris School of Economics - Université Panthéon-Sorbonne - Paris I)
    Abstract: There exists a large consensus in the economic literature and in the economic institutions about the legitimacy of policies subsidizing education. This legitimacy lies in the fact that education is a source of positive externalities. In a standard framework of endogenous fertility, the present paper shows that this result is still valid but that subsidizing education also requires to tax births. Indeed, education subsidies decrease the net cost of children such that parents can exhibit a too high fertility rate. Furthemore, when health is introduced as another source of externalities, the model shows that health expenditures have not always to be subsidized. Indeed, the taxation of births plays the role of an indirect subsidy on health expenditures because it decreases the cost of health relatively to the cost of the quantity of children. When the externalities on education are very high relatively to the positive externalities on health, the indirect subsidy on health can exceed the subsidy that is really needed. Then health expenditures have to be taxed. This results are discussed in the light of family policies implemented in China and Sub-Saharan Africa.
    Keywords: Fertility, education, health, family policy, taxation, mortality.
    Date: 2008–04
  10. By: Jens Kratzmann; Thorsten Schneider
    Abstract: Although in Germany, there is a regular age of school entry, some children start school later than usual and some children start ahead of schedule. While there has been some decrease in delayed school entries in the last years, the rate of premature school entry has increased substantially. Paradoxically, while the delayed entry is primarily because professionals rate a child as not ready for school, the premature entry is mainly based on parents¿ choice. The first aim of the paper is to discover whether kindergarten attendance can reduce the risk of a delayed entry. The arguments and hypotheses are mainly based on the theory on the ecology of human development of Bronfenbrenner. The empirical analyses demonstrate that low educated families profit most by kindergarten attendance, but only if the child begins attending the care institution before reaching age four. The second aim concerns theoretical and empirical considerations in regard to the decision of prematurely entering school. Therefore, we apply common sociological models on educational choice to the situation of school entry. Socio-economic conditions are not as important at this point as compared with a delay in school entry. However, there are some income effects indicating that higher income parents try to avoid further payments for kindergarten by fostering a premature entry to elementary schools, which is free of fees. The analyses are based on over 1.400 children in the relevant age group and their parents taking part in the large nationwide German Socio-Economic Panel Study (SOEP).
    Keywords: child care, school entry, educational inequality, educational choice
    Date: 2008
  11. By: Barnett, Richard C; Bhattacharya, Joydeep; Bunzel, Helle
    Abstract: This note studies a model in which heterogeneous income agents get a utility jolt only when their consumption catches up with the Joneses'. The resulting utility function is non-concave. In this setup, participation in a fair lottery has the potential to make some agents better off in an ex-ante sense even as it makes them financially vulnerable. More income-diverse people join the lottery pool when the `kick' from catching up increases. Worsening income inequality may increase the number of financially vulnerable people. The analysis sheds light on some aspects of the ongoing sub-prime mortgage crisis.
    Keywords: catching up with the Joneses, housing crisis, consumption externalities, non-concave utility, lotteries, inequality
    JEL: D0
    Date: 2008–04–17
  12. By: Song, Lina; Appleton, Simon
    Abstract: Survey data from urban China in 2002 show levels of life satisfaction to be low, but not exceptionally so, by international comparison. Many of the determinants of life satisfaction in urban China appear comparable to those for people in other countries. These include, inter alia, unemployment, income, marriage, sex, health and age. Communist Party membership and political participation raise life satisfaction. People appear fairly satisfied with economic growth and low inflation, and this contributes to their overall life satisfaction. There is dissatisfaction over pollution, but this – like job insecurity – does not appear to impact on life satisfaction.
    Keywords: life satisfaction; happiness; economic growth; unemployment; China
    JEL: D63 I31 I38 J18
    Date: 2008–04
  13. By: Rifka Weehuizen; Bulat Sanditov; Robin Cowan
    Abstract: Innovation is a source of increasing productivity, but it is also a source of stress. Psychological research shows that moderate stress increases the productivity of an actor, but above a certain level, additional stress decreases productivity. Stress is reduced by coping behaviour of the actor, and in addition it is buffered by social relations. However, high levels of stress negatively affect social relations, causing social erosion. In a formal model including inter-agent dynamics, we show that the variables moderating stress levels are of crucial importance for identi- fying the overall effects of different rates of innovation on productivity. The model shows among other things that the existence and nature of relationships of people determine the extent to which a certain rate of innovation effectively results in increasing productivity. In addition, it shows the possibility of multiple equilibria - under some parameter values both high- and low-stress steady states exist; and the dynamics exhibit hysteresis. At very high levels of stress, innovation can result in a dissolution of social relations, and has a negative relationship with the rate of economic growth.
    Date: 2008
  14. By: Alrubaie, Falah
    Abstract: Analysis of Human Development Indicators In Libya Alrubaie.Falah.K.Ali - Economics-faculty of Economics–derna-Omar Almukhtar university- Libya Summary This study aimed to diagnose the nature of the challenges facing human development in Libya in the future, in light of the trend towards privatization and economic reform and retreat of the role of the state and public sector, and the economic recession that dominated the Libyan economy since the mid-nineties yet, and how to maintain the gains made by, and address the shortage of quality aspects of the recipe given sustainability, after it became successful achievements in the areas of health and education are threatened with exposure to significant setback.The only way to meet those challenges is to intensify efforts to raise the level of the three dimensions of human development: the formation of human capacities, human use of this capacity, raising the level of human well-being and the granting of these indicators priority in the allocations of investment, and to keep raising the living standard of citizens while working to develop and improve constantly, and keenness to achieve justice in the distribution of incomes, and an evaluation and follow-up continuing to achieve human development consistent with the rates of international and national particularities and the advancement of the education sector in the context of economic restructuring to give priority to the aspects of quality and focus on the quality of education its various dimensions, and keep up with economic and social developments and changes and build modern health policy with the task of accurate diagnosis of the problems of the health sector, and the diagnosis of pros and cons current horizontal expansion in health services, policy and the reality of the pharmaceutical and medical supply and the proposed alternatives, and the reality of policy alternatives and spending in the health sector, and interest in the maintenance of the gains distributive and social justice in the provision of housing for all social groups, particularly those on low income, together with adherence to appropriate staffing resources, the need to develop a national strategy for the advancement of the status of women Jamahiriya, containing among other proposals, foremost of the establishment of social programmes to reduce the negative effects of economic restructuring programmes on the status of women, creation of a national fund for the advancement of women in order to improve their quality of life and ensure that aspects of the economic and social security through expansion of programmes investment loans and loan subsidies and housing programs marriage and custody and training programmes and rehabilitation
    Keywords: Analysis of Human Development Indicators In Libya
    JEL: O15
    Date: 2005–02–05
  15. By: Philippe Widmer (Socioeconomic Institute, University of Zurich); Peter Zweifel (Socioeconomic Institute, University of Zurich)
    Abstract: The purpose of this paper is to analyze the efficiency of the 26 Swiss cantons over the period 2000 to 2004 applying Data Envelopment Analysis (DEA). A Total Public Sector Performance (TPSP) indicator for eight local government activities (administration, public safety, education, culture and sport, health, transportation, environment and spatial planning, and public economy) is calculated to measure technical efficiency. Efficiency scores are then related to the fiscal equalization scheme designed to reduce disparities between cantons with the expectation to find a negative relationship. Results show the existing scheme to indeed have a negative influence on the performance of financially advantaged cantons. Surprisingly, however, earmarked transfers from the confederation to the cantons are not found to have a stronger negative influence on cantonal performance, contradicting the rationale for their suppression in a recent reform. Most public services fail to exhibit economies of scale, undermining quests for centralization of public good provision and suggesting the possibility of Tiebout competition.
    Keywords: DEA, efficiency measurement, federalism, fiscal equalization, public finance, Switzerland, Tiebout competition
    JEL: C14 C67 H11 H72 H83
    Date: 2008–04
  16. By: Alrubaie, falah.K.Ali
    Abstract: The challenge facing the Arab states at the present time, is how to preserve the gains they achieved in the sphere of human development and giving it a sustainable, by addressing the deficiencies and problems experienced by many of those indicators, and the future development will depend in the Arab world on how to tackle the obstacles that face human development in each country individually, and therefore the Arab states to exert more effort to achieve reforms in the economic sphere through diversification of the structure of the national economy to ensure sustainability in the development process and social importance of controlling the phenomenon of the rise in the rates of population growth and reform imbalance in the situation of women and paying attention to health and the eradication of communicable diseases and in the cultural field need to work on building a modern Arab culture and subjective, can be a centre of the development process, that occupies the site of this new culture heart engine that revolve around economic development processes and human, cultural, scientific, technological and creative, through raising the level of investment in human capital, building the knowledge and skill estimated and intensify education programmes and training and qualification of the workforce, and encourage spending on research and development and interest in the culture of individuals and encourage them to use advanced technical knowledge in the sector and ensure the right to education for all and promote freedom in the cultural and educational institutions and consolidate the foundations of democratic dialogue, in order to raise the efficiency of work and renovation, development and the eradication of illiteracy, because of illiteracy is deterrent to development and social progress and stress-year basic education for all, expansion and diversity in educational institutions, secondary and tertiary and higher education to meet the demands of the labour market and focus on the principle of lifelong education and the preparation of the self-learning which helps rights to adapt to the reality where the player not only continued, or future, only entrench equality and appreciation to all branches of human knowledge and experience, whether pursuant mentally, in practice, organizational, technical, productive, educational or aesthetic
    Keywords: An Analysis to human development indicators in the Arab States
    JEL: J24
    Date: 2006–04–05
  17. By: Robert Bandy; Mark Wilhelm (Department of Economics, Indiana Unviersity-Purdue University Indianapolis)
    Abstract: Models of young adults’ prosocial behavior—charitable giving and volunteering—are estimated as functions of family structure and income during the stages of childhood. Estimating a model of any subsequent outcome (prosocial or otherwise) as a function of stage-specific family structure and income imposes a set of restrictions on the underlying dynamic model of the child development process. Such restrictions have been implicitly and unknowingly imposed by the family structure specifications used in past research, and in some cases the past restrictions may not be sensible a priori. We consider several specifications used in past research, propose several new specifications with a priori sensible restrictions, and use Bayesian model comparison methods to choose among them. The models are estimated using data from the Panel Study of Income Dynamics and its new module the Center on Philanthropy Panel Study. The results indicate that the development of charitable giving and volunteering behavior is associated with family instability and low income in adolescence.
    Keywords: Charitable Giving, Donations, Volunteering, Altruism, Warm Glow
    JEL: D64 H40 J12
    Date: 2007–10

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