New Economics Papers
on Economics of Happiness
Issue of 2009‒05‒16
eleven papers chosen by

  1. Part-time work and Health among Older Workers in Ireland and Britain By Brenda Gannon; Jennifer Roberts
  2. Early retirement and inequality in Britain and Germany: How important is health? By Jennifer Roberts; Nigel Rice; Andrew M. Jones
  3. Health and Income: A Robust Comparison of Canada and the US By Jean-Yves Duclos; Damien Échevin
  4. Income, Happiness, and the Disutility of Labour By Andreas Knabe; Steffen Rätzel
  5. Dissatisfied with life, but having a good day- time-use and well-being of the unemployed By Andreas Knabe; Steffen Rätzel; Ronnie Schöb; Steffen Rätzel; Joachim Weimann
  6. Marriage Meets the Joneses: Relative Income, Identity, and Marital Status By Tara Watson; Sara McLanahan
  7. Human Capital Investments in Education and Home Stability: Exploring Education, Homeownership and Poverty By Jordan, Jeffrey L.; Anil, Bulent; Herbert, Velma; Chatterjee, Swan
  8. Measuring Farm Household Well-Being: Comparing Consumption and Income-based Measures By Jones, Carol Adaire; Milkove, Daniel; Paszkiewicz, Laura
  9. Human Development Index: Are Developing Countries Misclassified? (former title: "Consequences of Data Error in Aggregate Indicators: Evidence from the Human Development Index) By Wolff, Hendrik; Chong, Howard; Auffhammer, Maximilian
  10. Social capital and health across European countries By Bas van Groezen; Rashmi Jadoenandansing; Giacomo Pasini
  11. The Paradox of Declining Female Happiness By Betsey Stevenson; Justin Wolfers

  1. By: Brenda Gannon; Jennifer Roberts (Department of Economics, The University of Sheffield)
    Abstract: Part-time work is viewed as a viable option for people who wish to have a gradual transition to retirement. From a policy viewpoint, this may help to alleviate some labour supply shortages, especially in the context of the aging population. Factors such as health or pension provision may influence a person´s decision to work part-time. This paper considers the impact of health on the work decision for people aged 50 and over in the UK and Ireland. Methodological issues are discussed and the impact of unobserved individual effects is estimated using the Mundlak estimator applied to the multinomial probit model. The impact of health on part-time work is negative in Ireland, but we find no significant effect in the UK. The paper discusses potential reasons for these impacts and current policies on part-time work..
    Keywords: health, retirement, panel data
    JEL: J26 I10 C23
    Date: 2008–12
  2. By: Jennifer Roberts (Department of Economics, The University of Sheffield); Nigel Rice; Andrew M. Jones
    Abstract: Both health and income inequalities have been shown to be much greater in Britain than in Germany. One of the main reasons seems to be the difference in the relative position of the retired, who, in Britain, are much more concentrated in the lower income groups. Inequality analysis reveals that while the distribution of health shocks is more concentrated among those on low incomes in Britain, early retirement is more concentrated among those on high incomes. In contrast, in Germany, both health shocks and early retirement are more concentrated among those with low incomes. We use comparable longitudinal data sets from Britain and Germany to estimate hazard models of the effect of health on early retirement. The hazard models show that health is a key determinant of the retirement hazard for both men and women in Britain and Germany. The size of the health effect appears large compared to the other variables. Designing financial incentives to encourage people to work for longer may not be sufficient as a policy tool if people are leaving the labour market involuntarily due to health problems.
    Keywords: health, early retirement, hazard models
    JEL: J26 I10 C23 C41
    Date: 2008–11
  3. By: Jean-Yves Duclos; Damien Échevin
    Abstract: This paper uses sequential stochastic dominance procedures to compare the joint distribution of health and income across space and time. It is the First application of which we are aware of methods to compare multidimen- sional distributions of income and health using procedures that are robust to aggregation techniques. The paper's approach is more general than com- parisons of health gradients and does not require the estimation of health equivalent incomes. We illustrate the approach by contrasting Canada and the US using comparable data. Canada dominates the US over the lower bi-dimensional welfare distribution of health and income, though not generally in terms of the uni-dimensional distribution of health or income. The paper also finds that welfare for both Canadians and Americans has not unambiguously improved during the last decade over the joint distribution of income and health, in spite of the fact that the uni-dimensional distributions of income have clearly improved during that period.
    Keywords: Health inequality; Self-reported health status; Income distribution; Stochastic dominance; Social welfare
    JEL: I10 I32 I38 D63 D30 H51
    Date: 2009–04–20
  4. By: Andreas Knabe (Faculty of Economics and Management, Freie University Berlin); Steffen Rätzel (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: We reexamine the claim that the effect of income on subjective well-being suffers from a systematic downward bias if one ignores that higher income is typically associated with more work effort. We analyze this claim using German panel data, controlling for individual unobserved heterogeneity, and specifying the impact of working hours in a non-monotonic form. Our results suggest that the impact of working hours on happiness is rather small and exhibits an inverse U-shape. We do not find evidence that leaving working hours out of the analysis leads to an underestimation of the income effect.
    Keywords: Happiness, Life Satisfaction, Income, Working Hours
    JEL: D60 I31 J01
    Date: 2009–03
  5. By: Andreas Knabe (Faculty of Economics and Management, Freie University Berlin); Steffen Rätzel (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Ronnie Schöb (Faculty of Economics and Management, Freie University Berlin); Steffen Rätzel (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Joachim Weimann (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: We apply the Day Reconstruction Method to compare unemployed and employed people with respect to their subjective assessment of emotional affects, differences in the composition and duration of activities during the course of a day, and their self-reported life satisfaction. Employed persons are more satisfied with their life than the unemployed and report more positive feelings when engaged in similar activities. Weighting these activities with their duration shows, however, that average experienced utility does not differ between the two groups. Although the unemployed feel sadder when engaged in similar activities, they can compensate this by using the time the employed are at work in more enjoyable ways. Our finding that unemployment affects life satisfaction and experienced utility differently may be explained by the fact that people do not adjust their aspirations when becoming unemployed but face hedonic adaptation to changing life circumstances, triggered by the opportunity to use the time in a way that yields higher levels of satisfaction than working.
    Keywords: unemployment, happiness, life satisfaction, Day Reconstruction Method, experienced utility
    JEL: I31 J60 J22
    Date: 2009–03
  6. By: Tara Watson (Williams College, University of Michigan, and NBER); Sara McLanahan (Princeton University)
    Abstract: In this paper we investigate the effect of relative income on marital status. We develop an identity model based on Akerlof and Kranton (2000) and apply it to the marriage decision. The empirical evidence is consistent with the idea that people are more likely to marry when their incomes approach a financial level associated with idealized norms of marriage. We hypothesize that the “marriage ideal” is determined by the median income in an individual’s local reference group. After controlling flexibly for the absolute level of income and a number of other factors, the ratio between a man’s income and the marriage ideal is a strong predictor of marital status – but only if he is below the ideal. For white men, relative income considerations jointly drive coresidence, marriage, and fatherhood decisions. For black men, relative income affects the marriage decision only, and relative income is tied to marital status even for those living with a partner and children. Relative income concerns explain 10-15 percent of the decline in marriage since 1970 for low income white men, and account for more than half of the persistent marriage gap between high- and low-income men.
    Keywords: marriage, relative income, inequality, identity
    JEL: J12
    Date: 2009–02
  7. By: Jordan, Jeffrey L.; Anil, Bulent; Herbert, Velma; Chatterjee, Swan
    Abstract: The purpose of this paper is to investigate the relationship between housing uncertainties, child time preferences and education outcomes in the form of staying in school. The paper tests the hypothesis that students who face housing uncertainties through mortgage foreclosures and evictions learn impatient behavior and are therefore at greater risk of dropping our of school, impeding human capital formation and economic development.
    Keywords: discount rates, housing and educaiton, Community/Rural/Urban Development,
    Date: 2009
  8. By: Jones, Carol Adaire; Milkove, Daniel; Paszkiewicz, Laura
    Abstract: This paper reports estimates of consumption-based measures of well-being for farm households based on new, specially-designed survey questions in USDAâs annual, nationally representative survey of farms, the Agricultural Resource Management Survey. With this new data, we show how patterns of consumption-smoothing relative to income levels differ between farm households versus all U.S. households, and between households of operators of large farms vs. âresidential-lifestyleâ farms, with limited exposure to farm income variability. We then show that the consumption measure provides a different perspective than income and wealth on the well-being of farm households relative to all U.S. households.
    Keywords: household consumption, household income, household well-being, farm households, Consumer/Household Economics, D1:Household Behavior and Family Economics I31:General Welfare Q12:Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets,
    Date: 2009
  9. By: Wolff, Hendrik; Chong, Howard; Auffhammer, Maximilian
    Abstract: This paper examines the consequences of data error in data series used to construct aggregate indicators. Using the most popular indicator of country level economic development, the Human Development Index (HDI), we identify three separate sources of data error. We propose a simple statistical framework to investigate how data error may bias rank assignments and identify two striking consequences for the HDI. First, using the cutoff values used by the United Nations to assign a country as âlowâ, âmediumâ, or âhighâ developed, we find that currently up to 45% of developing countries are misclassified. Moreover, by replicating prior development/macroeconomic studies, we find that key estimated parameters such as Gini coefficients and speed of convergence measures vary by up to 100% due to data error.
    Keywords: Measurement Error, International Comparative Statistics, International Development, O10, C82,
    Date: 2009
  10. By: Bas van Groezen; Rashmi Jadoenandansing; Giacomo Pasini
    Abstract: We compare the effect of trust and civic participation on self-assessed health across ten European countries. We find that, after controlling for a rich set of socio-economic characteristics, for actual health status and for health-related behaviours, trust has a significantly positive effect on perceived health in Sweden and in Germany, but none in the other countries. Civic participation does have a positive and quite similar effect in all countries. Our conclusion is that they measure two different aspects of social capital that must be treated separately.
    Keywords: Panel Data, Wage Distribution, Inequality, Mobility
    JEL: I12 J14
    Date: 2009–04
  11. By: Betsey Stevenson; Justin Wolfers
    Abstract: By many objective measures the lives of women in the United States have improved over the past 35 years, yet we show that measures of subjective well-being indicate that women’s happiness has declined both absolutely and relative to men. The paradox of women’s declining relative well-being is found across various datasets, measures of subjective well-being, and is pervasive across demographic groups and industrialized countries. Relative declines in female happiness have eroded a gender gap in happiness in which women in the 1970s typically reported higher subjective well-being than did men. These declines have continued and a new gender gap is emerging—one with higher subjective well-being for men.
    JEL: D6 I32 J1 J7 K1
    Date: 2009–05

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.