nep-hap New Economics Papers
on Economics of Happiness
Issue of 2012‒06‒25
eight papers chosen by
Viviana Di Giovinazzo
University of Milano-Bicocca

  1. Happiness, Habits and High Rank: Comparisons in Economic and Social Life By Andrew E. Clark
  2. The Great Happiness Moderation By Andrew E. Clark; Sarah Flèche; Claudia Senik
  3. Are Relative-Income Effects Constant across the Well-being Distribution? By Budría, Santiago
  4. Remittances and Well-Being among Rural-to-Urban Migrants in China By Akay, Alpaslan; Giulietti, Corrado; Robalino, Juan David; Zimmermann, Klaus F.
  5. The Impact of Immigration on the Well-Being of Natives By Akay, Alpaslan; Constant, Amelie F.; Giulietti, Corrado
  6. Essays on (small) crime: Perception, social norms, happiness, and prevention. By Douhou, S.
  7. Maximizing Human Development By Merwan Engineer; Ian King
  8. The European origins of economic development By Easterly, William; Levine, Ross

  1. 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 considerable variety of economic and social activities, rendering conclusions regarding well-being policy less straightforward.
    Keywords: Comparison, habituation, income, unemployment, marriage, divorce, health, religion, policy
    JEL: D01 D31 H00 I31 J12 J28
    Date: 2012
  2. By: Andrew E. Clark (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA, IZA - Institute for the Study of Labor - IZA); Sarah Flèche (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA); Claudia Senik (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA, UP4 - Université Paris 4, Paris-Sorbonne - Université Paris IV - Paris Sorbonne - Ministère de l'Enseignement Supérieur et de la Recherche Scientifique)
    Abstract: This paper shows that within-country happiness inequality has fallen in the majority of countries that have experienced a positive income growth over the last forty years, in particular in developed countries. This new stylized fact comes as an addition to the Easterlin paradox, namely that the time trend in average happiness remains flat during episodes of long run income growth. This mean-preserving declining spread of happiness happens via a reduction in both the share of individuals who declare a very low and a very high level of happiness. The rise in income inequality moderates the fall in happiness inequality, and reverts it when it becomes too important, notably in the US starting in the 1990s. Hence, if raising the income of all will not raise the happiness of all, it will at least harmonize the happiness of all, provided that income inequality is not too high. Behind the veil of ignorance, this feature would certainly be considered attractive to risk-averse citizens.
    Keywords: Happiness ; Inequality ; Economic growth ; Development ; Easterlin paradox
    Date: 2012–06
  3. By: Budría, Santiago (University of Madeira)
    Abstract: This paper challenges the common assumption made by economists to date that income comparisons are similarly important in different segments of the subjective well-being (SWB) distribution. The results, based on the 2000-2007 waves of the German SOEP and on a Generalized Ordered Probit for panel data, show that relative income, as measured either by the mean income of the reference group or the individual ordinal ranking within the group, exerts a differential effect across SWB levels. Such divergence is assessed by means of the tradeoff ratio between household income and the relative income variables. The results show that a low rank and falling below the average income in one's group are significant determinants of low SWB but largely irrelevant when accounting for high SWB. The fact that conditionally unhappy individuals are more sensitive to comparisons, particularly if they are unfavorable, is consistent with earlier laboratory studies in the field of psychology.
    Keywords: subjective well-being, comparison income, income rank, generalized ordered response model
    JEL: D62 I31
    Date: 2012–05
  4. By: Akay, Alpaslan (IZA); Giulietti, Corrado (IZA); Robalino, Juan David (Imperial College London); Zimmermann, Klaus F. (IZA and University of Bonn)
    Abstract: The main objective of this paper is to propose a systematic approach to empirically analyse the effect of remittances on the utility of migrants, as proxied by their subjective well-being (SWB). Using data from a new survey on China (RUMiC), we estimate models in which a measure of subjective well- being is regressed on the level of remittances, and we find a sizeable positive correlation. The effect of remittances on well-being varies with the socio- economic characteristics of migrants, migration experience and the diversity of family arrangements. As a complementary objective, we use SWB measures to elicit the motivations behind remittances and find evidence that both altruistic (such as pure altruism and reciprocity) and contractual motivations (such as co-insurance and investment) are at work among rural-to-urban migrants in China.
    Keywords: migrants, subjective well-being, remittances
    JEL: J61 D63 D64 I3
    Date: 2012–06
  5. By: Akay, Alpaslan (IZA); Constant, Amelie F. (DIW DC, George Washington University); Giulietti, Corrado (IZA)
    Abstract: This paper examines the effect of immigration directly on the overall utility of natives. To the best of our knowledge, this is the first paper to explore such nexus. Combining information from the German Socio-Economic Panel dataset with detailed local labour market characteristics for the period 1997 to 2007, we investigate how changes in the spatial concentration of immigrants affect the subjective well-being of the German-born population. Our results suggest the existence of a robust, positive effect of immigration on natives' well-being. The presence of confounding local labour market characteristics has a negligible impact on the estimates. Furthermore, we find substantial evidence that the effect of immigration on well-being is a function of the assimilation of immigrants in the region. The effect of immigration is higher in regions with an intermediate level of economic assimilation and is essentially zero in areas where immigrants are either least or fully economically integrated. We conduct robustness checks to address the potential endogeneity between subjective well-being and immigration. Our tests indicate that natives are not crowded out by immigrants, and that the sorting of immigrants to regions with higher SWB is weak. This suggests that our main findings are not driven or strongly influenced by reverse causality or selectivity.
    Keywords: immigration, subjective well-being, assimilation
    JEL: C90 J61 D63
    Date: 2012–06
  6. By: Douhou, S. (Tilburg University)
    Abstract: The first chapter deals with keystroke dynamics, the study of human typing behavior, as a means to prevent crime. The remaining chapters focus on so-called small crimes (e.g., taking a bundle of printing paper from the office for private use, littering in a public place, or fare dodging). More specifically, the influence of offender and offense characteristics on small crime perception and how perception is related to reporting behavior (in case of witnessing a small crime) is analyzed in the third and fourth chapter. The last chapter investigates the happiness-crime relationship with a focus on trust and social norms.
    Date: 2012
  7. By: Merwan Engineer (University of Victoria, Canada); Ian King (The University of Melbourne, Australia)
    Abstract: The Human Development Index (HDI) is widely used as an aggregate measure of overall human well-being. We examine the allocations implied by the maximization of this index using a standard growth model. Maximization of the HDI leads to consumption (excluding education and health expenditures) being pushed to minimal levels. It also leads to the overaccumulation of education and/or health capital and possibly physical capital, relative to the standard golden rule. We propose an alternative specification of the HDI, where permanent consumption replaces income as the proxy for a decent standard of living. Maximization of this alternative index yields a "human development golden rule" which balances consumption, education and health expenditure in promoting human development. We also advocate the method of optimization subject to constraints for revealing the consequences of taking a policy measure seriously and testing its congruence with its underlying philosophy.
    Keywords: Economic growth, Human Development Index, Planning
    JEL: O21 O15
    Date: 2012–06
  8. By: Easterly, William; Levine, Ross
    Abstract: A large literature suggests that European settlement outside of Europe shaped institutional, educational, technological, cultural, and economic outcomes. This literature has had a serious gap: no direct measure of colonial European settlement. In this paper, we (1) construct a new database on the European share of the population during the early stages of colonization and (2) examine its impact on the level of economic development today. We find a remarkably strong impact of colonial European settlement on development. According to one illustrative exercise, 47 percent of average global development levels today are attributable to Europeans. One of our most surprising findings is the positive effect of even a small minority European population during the colonial period on per capita income today, contradicting traditional and recent views. There is some evidence for an institutional channel, but our findings are most consistent with human capital playing a central role in the way that colonial European settlement affects development today.
    Keywords: Institutions; Human Capital; Political Economy; Natural Resources
    JEL: O1
    Date: 2012–06

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