New Economics Papers
on Economics of Happiness
Issue of 2012‒09‒30
three papers chosen by

  1. Happiness and the Persistence of Income Shocks By Bayer, Christian; Juessen, Falko
  2. The Great Happiness Moderation By Clark, Andrew E.; Flèche, Sarah; Senik, Claudia
  3. The Spread Nightmare: Financial Crises and Happiness By Leonardo Becchetti; Giancarlo Marini; Aurora Murgea

  1. By: Bayer, Christian (University of Bonn); Juessen, Falko (TU Dortmund)
    Abstract: We reassess the empirical effect of income and employment on self-reported well-being. Our analysis makes use of a novel two-step estimation procedure that allows applying instrumental variable regressions with ordinal observable data. As suggested by the theory of incomplete markets, we differentiate between the effects of persistent and transitory income shocks. In line with this theory, we find that persistent shocks have a significant impact on happiness while transitory shocks do not. This has consequences also for inference about the happiness effect of employment. We find that employment per se is rather associated with a decline in happiness.
    Keywords: incomplete markets, happiness, income persistence
    JEL: E21 D12 D60
    Date: 2012–07
  2. By: Clark, Andrew E. (Paris School of Economics); Flèche, Sarah (Paris School of Economics); Senik, Claudia (Paris School of Economics)
    Abstract: This paper shows that within-country happiness inequality has fallen in the majority of countries that have experienced 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, which states that the time trend in average happiness is flat during episodes of long-run income growth. This mean-preserving declining spread in happiness comes about via falls in both the share of individuals who declare low and high levels of happiness. Rising income inequality moderates the fall in happiness inequality, and may even reverse it after some point, for example in the US starting in the 1990s. Hence, if raising the income of all does not raise the happiness of all, it will at least harmonize the happiness of all, providing that income inequality does not grow too much. Behind the veil of ignorance, lower happiness inequality would certainly be considered as attractive by risk-averse individuals.
    Keywords: happiness, inequality, economic growth, development, Easterlin paradox
    JEL: D31 D6 I3 O15
    Date: 2012–07
  3. By: Leonardo Becchetti (Faculty of Economics, University of Rome "Tor Vergata"); Giancarlo Marini (Faculty of Economics, University of Rome "Tor Vergata"); Aurora Murgea (West University of Timisoara)
    Abstract: The life satisfaction literature has boomed in the last decades since economists have access to more accurate databases allowing to test the impact of alternative variables on subjective well-being. A still unexplored issue is the relationship between financial crises and life satisfaction, due to the difficulty of collecting aggregate information at high frequency. Our proxies of life dissatisfaction used to overcome such difficulty are the normalized number of individuals searching the world happiness from Italy and from Germany on Google. We propose a simple model to explain the relationship among life dissatisfaction, Google happiness search and the level of the spread between the 10-year yields of Italian and German government bonds. We empirically find a strongly significant and positive correlation between the spread and happiness, net of the impact of confounding controls, as predicted by our model. When testing the direction of the nexus we find that the spread Granger causes the Google “happiness” search, showing that financial crises decrease well-being.
    Keywords: life satisfaction, financial crises, spread
    JEL: D31 D53 I31 G01
    Date: 2012–09–18

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