nep-hap New Economics Papers
on Economics of Happiness
Issue of 2008‒06‒21
seven papers chosen by
Viviana Di Giovinazzo
University of Milano-Bicocca

  1. Easterlin-types and Frustrated Achievers: the Heterogeneous Effects of Income Changes on Life Satisfaction By Becchetti, L.; Corrado, L.; Rossetti , F.
  2. On applying synthetic indices of multidimensional well-being: health and income inequalities in selected EU countries By Andrea Brandolini
  3. Values, inequality and happiness By Claudia Biancotti; Giovanni D'Alessio
  4. And What About the Family Back Home? International Migration and Happiness By Fernando Borraz; Susan Pozo; Máximo Rossi
  5. Conspicuous Consumption, Human Capital and Poverty By Moav, Omer; Neeman, Zvika
  6. Investment, Resolution of Risk, and the Role of Affect By Frans van Winden; Michal Krawczyk; Astrid Hopfensitz
  7. Analysis of Spatial Disparities by a Structural Equations Model By Maria Francesca Cracolici; Miranda Cuffaro; Peter Nijkamp

  1. By: Becchetti, L.; Corrado, L.; Rossetti , F.
    Abstract: Most philosophers and social scientists argue that the relationship between life satisfaction and its determinants is intermediated by cultural drivers (education, race, gender, religion, regional cultural background, etc.) and that (as suggested by descriptive evidence on "frustrated achievers") the relationship between changes in income and changes in life satisfaction is not necessarily positive. We investigate such relationship across the waves of the British Household Panel Study. By using a latent class approach which accounts for slope heterogeneity, omitted variable bias and departures from normality assumptions we have the unique opportunity of identifying determinants of the income-life satisfaction relationship and testing econometrically for the existence of “frustrated achievement". Our findings reveal the presence of a vast majority of "Easterlin-type" individuals with positive but very weak relationship between changes in income and changes in life satisfaction and a small minority (2 percent) of frustrated achievers with negative relationship. Such share is much below descriptive evidence on frustrated achievement (17.5 percent). The probability of belonging to such group is shown to be positively related with divorced status and negatively related to education and relative (personal to reference group) income. Our interpretation of these results is that the standard concave money-life satisfaction relationship provides a partial and incomplete picture of the complex nexus between life satisfaction and income as it does not take into account two important phenomena: the role of peers and of reference group income and that of the dynamics between realisations and expectations. The paradox of a negative relationship between changes in income and changes in life satisfaction may be explained by the fact that, in spite of a positive income change, the change in individual expectations and of peers income may be even higher, thereby generating the negative change in satisfaction.
    Keywords: income-life satisfaction relationship, frustrated achievement, mixture models.
    JEL: C14 C23 I30
    Date: 2008–04
  2. By: Andrea Brandolini (Bank of Italy, Department for Structural Economic Analysis)
    Abstract: The multidimensional view of well-being is receiving growing attention, both in academic research and policy-oriented analysis. This paper examines empirical strategies to measure poverty and inequality in multiple domains, concentrating on two problems in the use of synthetic multidimensional indices: the weighting structure of different functionings and the functional form of the index. These problems are illustrated by comparing inequality and deprivation in income and health in the four largest countries of the EU: France, Germany, Italy and the United Kingdom.
    Keywords: inequality, poverty, multidimensional analysis, capability approach
    JEL: I31 I32 D63 D31
    Date: 2008–04
  3. By: Claudia Biancotti (Bank of Italy, Economic and Financial Statistics Department); Giovanni D'Alessio (Bank of Italy, Economic and Financial Statistics Department)
    Abstract: This paper examines the relationship between inequality and happiness through the lens of heterogeneous values, beliefs and inclinations. Drawing upon opinion data from the European Social Survey for twenty-three countries, we find that individual views on a wide range of themes can be effectively summarized by two orthogonal dimensions: moderation and inclusiveness. The former is defined as a tendency to take mild stands on issues rather than extreme ones; the latter is defined as the degree of support for a social model that grants equal rights to everyone who willingly subscribes to a shared set of rules, regardless of background and circumstances. These traits matter when it comes to how inequality affects subjective well-being; specifically, those who are either more moderate or more inclusive than their average compatriots prefer lower levels of inequality. In the case of moderation, inequality aversion can be read in terms of a desire for stability: people who are reluctant to take strong stands are especially wary of conflict, tension and unrest, which often go handin-hand with disparities. In the case of inclusiveness, the main element at play is likely to be distress accruing on a perception of unfairness.
    Keywords: happiness, inequality, heterogeneity
    JEL: D31 D63
    Date: 2008–04
  4. By: Fernando Borraz (Universidad de Montevideo); Susan Pozo (Western Michigan University); Máximo Rossi (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)
    Abstract: In this study we use data on subjective well being and migration in Cuenca, one of the Ecuador's largest cities. We examine the impact of migration on the happiness of the family left behind. We use the propensity score matching estimator to take into account the endogeneity of migration. Our results indicate that migration reduces the happiness of those left behind. We also find that the monetary inflows (remittances) that accompany migration do not increase happiness levels among recipients. These results suggest that the family left behind cannot be compensated, for the increase in unhappiness that it sustains on account of the emigration of loved ones, with remittances from abroad.
    Keywords: Happiness, migration, remittances
    JEL: A12 F22 I31
    Date: 2008–02
  5. By: Moav, Omer; Neeman, Zvika
    Abstract: Poor families around the world spend a large fraction of their income on consumption of goods that appear to be useless in alleviating poverty, while saving at very low rates and neglecting investment in health and education. Such consumption patterns seem to be related to the persistence of poverty. We offer an explanation for this observation, based on a trade-off between conspicuous consumption and human capital as signals for unobserved income, under the assumption that individuals care about their status. Despite homothetic preferences, this trade-off gives rise to a convex saving function, which can help explain the persistence of poverty.
    Keywords: Conspicuous Consumption; Human Capital; Poverty
    JEL: D91 O11 O12 O15
    Date: 2008–06
  6. By: Frans van Winden (University of Amsterdam, CEPR, CESifo); Michal Krawczyk (University of Amsterdam); Astrid Hopfensitz (TSE (GREMAQ), University of Toulouse)
    Abstract: This experimental study is concerned with the impact of the timing of the resolution of risk on people’s willingness to take risks, with a special focus on the role of affect. While the importance of anticipatory emotions has so far been only inferred from decisions regarding hypothetical choice problems, we had participants put their own money at risk in a real investment task. Moreover, emotions were explicitly measured, including anticipatory emotions experienced during the waiting period under delayed resolution (which involved two days). Affective traits and risk attitudes were measured through a web-based questionnaire before the experiment and participants’ preferences for resolution timing, risk, and time were incentive compatibly measured during the experiment. Main findings are that delayed resolution can affect investment, that the effect depends on the risk involved, and that (among all the measures considered) only emotions can explain our results, albeit in ways that are not captured by existing models.
    Keywords: Investment decision; delayed resolution of risk; emotions; experiment
    JEL: C91 D81 G11
    Date: 2008–05–15
  7. By: Maria Francesca Cracolici (VU University Amsterdam); Miranda Cuffaro (University of Palermo); Peter Nijkamp (VU University Amsterdam)
    Abstract: This paper presents a new analytical framework for assessing spatial disparities among countries. It takes for granted that the analysis of a country’s performance cannot be limited solely to either economic or social factors. The aim of the paper is to combine relevant economic and non-economic (mainly social) aspects of a country’s performance in an integrated logical framework. Based on this idea, a structural simultaneous equation model will be presented and estimated in order to explore the direction of the causal relationship between the economic and the non-economic aspects of a country’s performance. Furthermore, an exploration of the trajectory that each country has registered over time along a virtuous path will be offered. By means of a matrix persistency/transition analysis, the countries will be classified in clusters of good/bad performance. One of the most interesting conclusions concerns the inability of most countries to turn the higher educational skills of the population into greater economic performance over time. In addition, our analysis also shows that making an accurate picture record and formulating related policy aiming at environmental care is highly desirable. It is surprising that only a few countries have reached a favourable economic and environmental performance simultaneously.
    Keywords: Socio-economic well-being; living standards; structural simultaneous equation model
    JEL: P46
    Date: 2008–06–09

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