New Economics Papers
on Economics of Happiness
Issue of 2011‒11‒07
three papers chosen by

  1. Age, Life-Satisfaction, and Relative Income: Insights from the UK and Germany By FitzRoy, Felix; Nolan, Michael A.; Steinhardt, Max
  2. “How are you feeling?” Assessing reporting bias in a subjective measure of health by quantile regression By Lunde, Lene; Løken, Katrine Vellesen
  3. Long-run Welfare under Externalities in Consumption, Leisure, and Production: A Case for Happy Degrowth vs. Unhappy Growth By Ennio Bilancini; Simone D'Alessandro

  1. By: FitzRoy, Felix (University of St. Andrews); Nolan, Michael A. (University of Hull); Steinhardt, Max (Hamburg Institute of International Economics (HWWI))
    Abstract: We first confirm previous results with the German Socio-Economic Panel by Layard et al. (2010), and obtain strong negative effects of comparison income. However, when we split the sample by age, we find quite different results for reference income. The effects on life-satisfaction are positive and significant for those under 45, consistent with Hirschman's (1973) 'tunnel effect', and only negative (and larger than in the full sample) for those over 45, when relative deprivation dominates. Thus for young respondents, reference income's signalling role, indicating potential future prospects, can outweigh relative deprivation effects. Own-income effects are also larger for the older sample, and of greater magnitude than the comparison income effect. In East Germany the reference income effects are insignificant for all. With data from the British Household Panel Survey, we confirm standard results when encompassing all ages, but reference income loses significance in both age groups, and most surprisingly, even own income becomes insignificant for those over 45, while education has significant negative effects.
    Keywords: subjective life-satisfaction, comparison income, reference groups, age, welfare
    JEL: D10 I31 J10
    Date: 2011–10
  2. By: Lunde, Lene (University of Bergen); Løken, Katrine Vellesen (University of Bergen)
    Abstract: In this paper we investigate reporting heterogeneity in the Visual Analogue Scale (VAS) when it is used to measure current health status in cardiovascular patients. We provide a new framework to identify reporting heterogeneity using quantile regressions. EQ-5D responses are used as a proxy to control for objective health. The objectiveness of this generic measure is supported by other measures of actual health. The data comes from a Norwegian, health-related quality of life study. We find substantial evidence of reporting bias in VAS related to gender and education. For some quantiles we observe reporting heterogeneity related to age and weight.
    Keywords: Reporting bias; quantile regression; health measurement
    JEL: C21 I10 I12
    Date: 2011–05–01
  3. By: Ennio Bilancini; Simone D'Alessandro
    Abstract: In this paper we contribute to the debate on the relationship between growth and well-being by examining an endogenous growth model where we allow for externalities in consumption, leisure, and production. We analyze three regimes: a decentralized economy where each household makes isolated choices without considering their external effects, a planned economy where a myopic planner fails to recognize both leisure and consumption externalities but recognizes production externalities, and a planned economy with a fully informed planner. We first compare the balanced growth paths under the three regimes and then we numerically investigate the transition to the optimal balanced growth path. We provide a number of ndings. First, in a decentralized economy growth or labor (or both) are greater than in the regime with a fully informed planner, and hence are sub-optimal from a welfare standpoint. Second, a myopic intervention which overlooks consumption and leisure externalities leads to more growth and labor than in both the decentralized and the fully informed regime. Third, we provide a case for happy degrowth: a transition to the optimal balanced growth path that is associated with downscaling of production, a reduction in private consumption, and an ongoing increase in leisure and well-being.
    Keywords: degrowth; endogenous growth; consumption externalities; leisure externalities; production externalities
    JEL: Q13 E62 H21 H23
    Date: 2011–11

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.