nep-hap New Economics Papers
on Economics of Happiness
Issue of 2008‒11‒25
fourteen papers chosen by
Viviana Di Giovinazzo
University of Milano-Bicocca

  1. Determinants of self-employment : the case in Vietnam. By Thi Quynh Trang Do; Gérard Duchêne
  2. Job Insecurity and Wages By David Campbell; Alan Carruth; Andrew Dickerson; Francis Green
  3. Can subjective survival expectations explain retirement behaviour? By Owen O'Donnell; Federica Teppa; Eddy van Doorslaer
  4. Life Satisfaction and Quality of Development By John F. Helliwell
  5. Life expectancy and the environment. By Fabio Mariani; Agustin Pérez-Barahona; Natacha Raffin
  6. Economic Satisfaction and Income Rank in Small Neighbourhoods By Clark, Andrew E.; Kristensen, Nicolai; Westergård-Nielsen, Niels
  7. The Human Development Index as a Criterion for Optimal Planning By Merwan Engineer; Ian King; Nilanjana Roy
  8. Biological versus foster children education : the old-age support motive as a catch-up determinant ? Some evidence from Indonesia. By Karine Marazyan
  9. Comparing Welfare Change Measures withIncome Change Measures in Behavioural Policy Simulations By John Creedy; Nicolas Herault; Guyonne Kalb
  10. Happiness, habits and high rank: Comparisons in economic and social life By Andrew E. Clark
  11. Happiness, Economic Well-being, Social Capital and the Quality of Institutions By Gabriel Leite Mota; Paulo Trigo Pereira
  12. FDI and Human Capital Development By Subbarao Srinivas P.
  13. Alone at home By Pääkkönen, Hannu
  14. Land and Happiness: Land Distribution and Subjective Well-Being in Moldova By Van Landeghem, Bert; Swinnen, Johan; Vranken, Liesbet

  1. By: Thi Quynh Trang Do (Centre d'Economie de la Sorbonne); Gérard Duchêne (Centre d'Economie de la Sorbonne)
    Abstract: The determinants of self-employment are widely studied in the economic literature in recent twenty years. However, in the case of Vietnam where self-employed population takes an important proportion in workforce, it remains an under researched area. By using the data from the Vietnam Household Living Standard Survey 2004 (VHLSS2004), this paper aims to provide clearer insights into this area. We use the Heckman method to determine the level and identify the factors that affect the workers' choice between self-employment and wage employment in Vietnam. We emphasize the role of expected earnings differential in workers' decision making. Comparisons between female and male workers are made. Our empirical results show that there exist a number of determinants that permit to construct the pattern of self-employed as well a salary workers in Vietnam. Regardless of educational attainment, experiences and familial background, perspective of having higher earnings plays an important role in choice behavior of workers.
    Keywords: GARCH, Generalized Hyperbolic Distribution, pricing, risk neutral distribution.
    JEL: D21 J24 M13 O17
    Date: 2008–09
  2. By: David Campbell; Alan Carruth; Andrew Dickerson; Francis Green
    Abstract: This paperexamines whether subjective expectations of unemployment are reliable indicators of the probability of becoming unemployed, and investigates their association with wage growth. We find that workers’ fears of unemployment are increased by their previous unemployment experience and by the unemployment experiences of a close friend, and are associated with other objective indicators of insecure jobs. We then show that unemployment fear predicts future unemployment, above and beyond observed objective variables. High fears of unemployment are found to be associated with significantly lower levels of wage growth for men, but to have no significant link with wage growth for women.
    Keywords: Job Insecurity; Wages; Unemployment; Subjecctive Expectations
    JEL: J60 J30
    Date: 2008–11
  3. By: Owen O'Donnell; Federica Teppa; Eddy van Doorslaer
    Abstract: Theory predicts a number of mechanisms through which survival expectations influence retirement decisions: a wealth effect of a longer lifespan; an uncertainty effect through the return on savings; a longevity risk effect; and, an adverse selection effect from pooling within pensions. We use data from the first three waves of the English Longitudinal Study of Ageing to test whether the timing of retirement is responsive to subjective survival expectations. Measurement error in reported survival chances is allowed for by instrumenting using parental longevity and smoking behaviour. We find a significant concave relationship between the propensity to retire and survival expectations. Men who are extremely pessimistic about their survival chances are least likely to retire, but after initially rising steeply the propensity to retire falls as survival expectations improve over most of their range. This is consistent with some of the theory. For women, the results are more sensitive to allowing for endogeneity. Surprisingly, the retirement behaviour of the less educated is more sensitive to survival expectations.
    Keywords: Longevity; Retirement; Pensions; Expectations; Subjective Survival Probability.
    JEL: D84 D91 H55 J26
    Date: 2008–11
  4. By: John F. Helliwell
    Abstract: This paper argues that measures of life satisfaction, now being collected annually by the Gallup World Poll in more than 130 countries, permit a much broader view of the quality and consequences of development than other common measures. While these data show the importance of conventionally measured economic development, they also show the importance of many other elements of life that are also affected, whether deliberately or not, by community, national, and international institutions and policies. In estimating the importance of these other factors, this paper pays special attention to the social context of well-being: the norms, networks and relationships within which lives are lived.
    JEL: D6 I3 J1 O0 O10 P51
    Date: 2008–11
  5. By: Fabio Mariani (Centre d'Economie de la Sorbonne - Paris School of Economics and IZA); Agustin Pérez-Barahona (Centre d'Economie de la Sorbonne); Natacha Raffin (Centre d'Economie de la Sorbonne)
    Abstract: We present an OLG model in which life expectancy and environmental quality dynamics are jointly determined. Agents may invest in environmental quality, depending on how much they expect to live, but also in order to leave good environmental conditions to future generations. In turn, environmental conditions affect life expectancy. The model produces multiple steady states (development regimes) and initial conditions do matter. In particular, some countries may be trapped in a low life expectancy / low environmental quality trap. This outcome is consistent with stylized facts relating life expectancy and environmental performance measures. Possible strategies to escape from this kind of trap are also discussed. Finally, this result is robust to the introduction of human capital through parental education expenditures.
    Keywords: Environmental quality, life expectancy, poverty traps.
    JEL: D62 J13 J24 O11 Q56
    Date: 2008–07
  6. By: Clark, Andrew E. (PSE); Kristensen, Nicolai (Aarhus School of Business); Westergård-Nielsen, Niels (Aarhus School of Business)
    Abstract: We contribute to the literature on well-being and comparisons by appealing to new Danish data dividing the country up into around 9,000 small neighbourhoods. Administrative data provides us with the income of every person in each of these neighbourhoods. This income information is matched to demographic and economic satisfaction variables from eight years of Danish ECHP data. Panel regression analysis shows that, conditional on own household income, respondents report higher satisfaction levels when their neighbours are richer. However, individuals are rank-sensitive: conditional on own income and neighbourhood median income, respondents are more satisfied as their percentile neighbourhood ranking improves. A ten percentage point rise in rank (i.e. from 40th to 20th position in a 200-household cell) is worth 0.11 on a one to six scale, which is a large marginal effect in satisfaction terms.
    Keywords: income comparisons, neighbours, satisfaction, geo-coded data
    JEL: C23 C25 D84 J28 J31 J33
    Date: 2008–11
  7. By: Merwan Engineer; Ian King; Nilanjana Roy
    Abstract: Planning strategies that maximize the Human Development Index (HDI) tend towards minimizing consumption and maximizing non-investment expenditures on education and health. Interestingly, such strategies also tend towards equitable outcomes, even though inequality aversion is not modelled in the HDI. A problematic feature of strategies that maximize the HDI is that the income component in the index only role is to distort the allocation between health and education expenditure. Because the income component does not play its intended role of securing resources for a decent standard of living, we argue that it is better to drop income from the index in considering optimal plans. Alternatively, we consider net income, income net of education and health expenditures, as indicator of capabilities not already reflected in the education and life expectancy components of the index. When net income is used in a modified HDI index, optimal plans yield a balance between allocations for consumption, education, and health. Finally, we calculate our modified indexes for OECD countries and compare them with the HDI.
    Keywords: Consumption; Human development index; Income; Inequality; Planning
    JEL: O21 O15
    Date: 2008
  8. By: Karine Marazyan (Centre d'Economie de la Sorbonne)
    Abstract: This paper aims at explaining differences in education among foster-children and between foster and biological children in developing countries. Foster-children whose biological parents are alive may provide old-age support for both their host and biological parents. Therefore foster-children have lower returns to education than biological children and should receive less human capital investment in household where both types of children live together. However, in households where foster-children are alone, host parents will over-invest in their education to ensure that the expected old-age support will equal a minimum amount to survive. Using data from Indonesia, we provide some evidence supporting our hypothesis.
    Keywords: Household structure, child fostering, sibling rivalry.
    JEL: I2 J1 O1
    Date: 2008–07
  9. By: John Creedy; Nicolas Herault; Guyonne Kalb
    Abstract: This paper presents a method of computing welfare changes (compensating and equivalent variations) arising from a tax or social security policy change, in the context of behavioural microsimulation modelling where individuals can choose between a limited number of discrete hours of work. The method allows fully for the nonlinearity of the budget constraint facing each individual, the probabilistic nature of the labour supply model and the presence of unobserved heterogeneity in the estimation of preference functions. An advantage of welfare measures, compared with changes in net incomes, is that they take into account the value of leisure and home production. The method is applied to hypothetical income tax policy changes in Australia and comparisons are made at the individual and the aggregate level. At the aggregate level a social welfare function is specified in terms of money metric utility. It is shown that policy evaluations based on welfare changes can be substantially different from those using only individuals' net income changes.
    Keywords: Welfare change measures;equivalent variation; compensating variation; labour supplymodelling;nonlinear budget constraint
    JEL: D63 H31 J22
    Date: 2008
  10. By: Andrew E. Clark
    Abstract: The role of money in producing sustained subjective well-being seems to be seriously compromised by social comparisons and habituation. But does that necessarily mean that we would be better off doing something else instead? This paper suggests that the phenomena of comparison and habituation are actually found in a variety of economic and social activities, rendering conclusions regarding well-being policy less straightforward.
    Date: 2008
  11. By: Gabriel Leite Mota; Paulo Trigo Pereira
    Abstract: Since Jeremy Bentham, utilitarians have argued that happiness, not just income or wealth, is the maximand of individual and social welfare. By contrast, Rawls and followers argue that to share a common perception of living in a just society is the “ultimate good” and that individuals have a moral ability to evaluate just institutions. In this paper we argue that just institutions, apart from their intrinsic value, also have an instrumental value, both in economic performance and in happiness. Thus happiness -- or subjective well being -- is analyzed as being a function of economic well-being, the quality of public institutions and social ties. Cross section individual data from citizens in OECD countries show that income, education and the perceived quality of institutions have the highest impact on life satisfaction, followed by social capital. Country analysis shows a non linear but positive influence of per capita GDP on life satisfaction, but also that unemployment and inflation reduce average happiness, the former effect being stronger. Finally, better quality public institutions and having more social capital also bring more happiness. We conclude with some policy implications.
    Keywords: Happiness; Democracy; Social Capital; Quality of Institutions
    JEL: D63 D69 D78 J10 Z13
    Date: 2008–07
  12. By: Subbarao Srinivas P.
    Abstract: FDI has considered a major catalyst in promoting sustainable development in developing countries. FDI has the potential to generate employment, raise productivity, transfer skills and technology, increased income, enhance exports and contribute to the long-term economic development of the world’s developing countries. The investing countries usually supply superior technologies to the host countries. At the initial stages, however, the less developed countries (LDC) lack not only the necessary skills and infrastructure to attract FDI in high technology sector but also the knowledge for proper implementation of technology. Since this requires less technical capabilities, skill building in the host LDC is less. However, such skill building, even though small, creates a platform for the LDC to develop their existing technology and capital productivity. This helps in improving the human capital of the country by facilitating education and technical training to a greater mass of people. Eventually, with the development of the economy the country moves from the subsistence level to the point where the dependence on FDI gradually shifts from mere manufacturing level to the managerial level of a company. At this point of time, the LDC should aim at attracting effective FDI. By effective FDI, we mean the FDI that is development friendly – FDI that fosters not only growth of the nation, but also growth and development of each resident of the country. In other words, effective FDI indulges in enhancement of human capital of the country. The growth of an economy can sustain only though the growth of an increasing, economically productive labor force. This paper explains importance of human capital skilling, the relation between the FDI and Human Capital development besides the experiences of these two in different regions of the world i.e., Asian and Latin American experiences.
    Date: 2008–02–08
  13. By: Pääkkönen, Hannu
    Abstract: Recently there has been much public discussion about children spending long afternoons alone at home. It has been claimed that spending a lot of time alone makes children vulnerable to many kinds of risk behaviour, such as smoking, use of alcohol and drugs, depression and poor school performance. Concerns have also been voiced about children’s unsupervised television watching, playing of computer games and surfing on the Internet. Yet, do we actually know how long the times are that children do spend alone at home and what do they do during that time? The purpose of this paper is to study how much time youngsters in Finland spend alone at home, who are the youngsters who are alone and what do they do when they are alone. The research data are data relating to households from the 1999–2000 Time Use Survey of Statistics Finland. The data cover the shared days of fami-lies with children on which all family members aged 10 or over kept a time use diary. The respondents recorded into the diaries at 10-minute accuracy whether they were alone or together with children aged under 10 belong-ing to the same household, other members of the household, or with other people they knew. Besides the data concerning being alone or together with somebody, the paper also exploits diary information on whether other members of the household were at home at the time in question. The scope of the study is limited to school stu-dents aged from 10 to 18. The material contains data on 191 schooldays and 229 days off school.
    Keywords: Intra-family time use; “with whom” context
    JEL: D13 J13
    Date: 2008–11
  14. By: Van Landeghem, Bert; Swinnen, Johan; Vranken, Liesbet
    Abstract: The distribution of land rights is a very important economic and political issue, and it played a central role in the transition processes in Europe and Asia. This paper analyzes the impact of the distribution of land on household welfare by using subjective well-being (SWB) data from a rural household survey in Moldova, the poorest country in Europe. The recent land reform in Moldova provides a natural experiment on the impact of land ownership distribution on SWB. We find that household land holdings have a positive effect on SWB but neighbours€٠average land holdings have a negative effect on SWB. People, regardless of the land distribution and even given the relatively low living standards of these households, rate their welfare by looking at how much other people possess. The findings of the paper have more general implications as it is one of the first attempts to measure the impact of wealth, rather than income, on SWB.
    Keywords: Land Economics/Use,
    Date: 2008

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