New Economics Papers
on Economics of Happiness
Issue of 2011‒01‒03
two papers chosen by

  1. Unreported Income, Education and Subjective Well-Being By Gyorgy Molnar; Zsuzsa Kapitany
  2. Does fiscal discipline towards sub-national governments affect citizens’ well-being? evidence on health By Massimiliano Piacenza; Gilberto Turati

  1. By: Gyorgy Molnar (Institute of Economics Hungarian Academy of Sciences); Zsuzsa Kapitany (Institute of Economics Hungarian Academy of Sciences)
    Abstract: There are two fairly widespread economic beliefs in Hungary that we investigate in this study and try to confirm or reject. People mostly see poverty and marginal labour market status as indicators of laziness and own tax evasion behaviour. People believe that the actual income of the poor and of people with disadvantageous labour market status is considerably more than that they declare. Analogous belief among highly educated people is that people with diploma have relatively less undeclared income than the others. In this study we make an attempt to identify relative unreported income of different social groups, using survey information on subjective well-being. In this attempt we apply the connection between reported satisfaction and actual income. We cannot exactly prove that the unreported income of the poor is relatively not higher than the unreported income of others, but our results make this statement very plausible. What we can show is that taking part in informal activity is not an option, but a forced choice for the majority of the poor. Unemployed, day-workers, public workers, and people living on welfare do not have considerable undeclared income, or if they had some this is accompanied by such self-exploitation that this offsets the effect of undeclared income on subjective well-being. We can also prove that people with diploma are in a much better and more advantageous situation than the others. Their economic, social and financial status has a considerable and positive effect on their subjective well-being. It is suggested and likely true that they have relatively more undeclared income than people without diploma. After controlling for income, activity, employment status, health state, social inclusion and relationships the education differences do not have an effect on subjective well-being, except higher education has a further, significant and considerable effect on subjective well-being.
    Keywords: subjective well-being, unreported income, informal income, education, unemployment, non-employment, subjective health
    JEL: D1 D12 D31 I10 I20 I30 J20 J60
    Date: 2010–11
  2. By: Massimiliano Piacenza (University of Torino & HERMES); Gilberto Turati (University of Torino & HERMES)
    Abstract: This paper aims at assessing the impact on citizens’ well-being of fiscal discipline imposed by Central Government to sub-national governments. Since health care policies involve strategic interactions between different layers of governments in many different countries, we focus on a particular dimension of well-being, namely citizens’ health. We model fiscal discipline by considering sub-national governments expectations of future deficit bailouts from the Central Government. We then study how these bailout expectations affect the expenditure for health care policies carried out by decentralized governments. To investigate this issue, we separate efficient health spending from inefficiencies by estimating an input requirement frontier. This allow us to assess the effects of bailout expectations on both the structural component of health expenditure and its deviations from the ‘best practice’. The evidence from the 15 Italian Ordinary Statute Regions (observed from 1993 to 2006) points out that bailout expectations do not significantly influence the position of the frontier, thus do not affect citizens’ health. However, they appear to exert a remarkable impact on excess spending.
    Keywords: Intergovernmental relationships, soft budget constraint, bailout expectations,health care policy, spending efficiency.
    JEL: H11 H75 H77 I12 I18
    Date: 2010

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