New Economics Papers
on Economics of Happiness
Issue of 2013‒08‒31
nine papers chosen by

  1. European Capitals of Culture and Life Satisfaction By Lasse Steiner; Bruno S. Frey; Simone Hotz
  2. Cross-Sectional and Longitudinal Equivalence Scales for West Germany Based on Subjective Data on Life Satisfaction: Paper Presented at the Fifth Meeting of the Society for the Study of Economic Inequality (ECINEQ) Bari (Italy), 22th - 24th July 2013 By Jürgen Faik
  3. The Role of Interviewer Encounters in Panel Responses on Life Satisfaction By Adrian Chadi
  4. "Romanticizing Penniless Entrepreneurs?" The Relationship between Start-Ups and Human Wellbeing across Countries By Naudé, Wim; Amorós, José Ernesto; Cristi, Oscar
  5. A Note on Modelling Dynamics in Happiness Estimations By Alan, Piper
  6. My Group Beats Your Group: Evaluating Non-Income Inequalities By Tugce Cuhadaroglu
  7. Information technologies and subjective well-being: Does the internet raise material aspirations? By Lohmann, Steffen
  8. How status concerns can make us rich and happy By Strulik, Holger
  9. Preferences, income, and life satisfaction: An equivalence result By Strulik, Holger

  1. By: Lasse Steiner; Bruno S. Frey; Simone Hotz
    Abstract: This paper analyzes whether hosting the most prestigious European cultural event, the European Capital of Culture, has an impact on regional economic development or the life satisfaction of the local population. Concerning the economic impact, we show that European Capitals are hosted in regions with above average GDP per capita, but do not causally affect the economic development in a significant way. Even a positive impact on GDP per capita would not imply a positive impact on individual utility or social welfare of the regional population. Surprisingly, using difference-in-difference estimations, a negative effect on the well-being of the regional population is found during the event. Since no effect is found before the event, reverse causality and positive anticipation can be ruled out. The negative effect during the event might result from dissatisfaction with the high levels of public expenditure, transport disruptions, general overcrowding or an increase in housing prices.
    Keywords: Life Satisfaction; Mega-Events; Culture; European Capital of Culture
    JEL: Z11
    Date: 2013–04
  2. By: Jürgen Faik
    Abstract: The present study calculates variable, cross-sectional as well as longitudinal equivalence scales on the basis of the German 1984-2010 Socio-Economic Panel (SOEP) database for West Germany. It follows the “individual variant” for calculating subjective equivalence scales using “life satisfaction” as a proxy variable for “utility”. The cross-sectional scale estimates are characterized by relatively low scale values which is typical for the subjective scale approach. As a further main result, the estimated longitudinal equivalence scales reveal some but rather slight cohort-specific scale differences. Especially, the unsatisfactory fit of the paper’s regressions points to the need for more research activities in this strand of social science research. The latter must be emphasized since equivalence scales are very important for social policy. Specifically, this holds true for longitudinal scales in order to capture cohort effects and, thus, to deal with intra- and intergenerational aspects of well-being (and corresponding differences).
    Keywords: Equivalence scales, life satisfaction, longitudinal analysis, cohorts’ well-being
    Date: 2013
  3. By: Adrian Chadi (Institute for Labour Law and Industrial Relations in the EU, University of Trier)
    Abstract: This paper examines a common explanation why participants of panel surveys may report declining life satisfaction over time. In line with the argument of developing trust relationships between interviewers and interviewees, the analysis reveals positive effects in reported life satisfaction when the person conducting the interview changes to an unfamiliar individual. Yet, the evidence also shows that the overall decline is determined by years in the panel, rather than by number of encounters with one specific interviewer. The realization that such response artifacts can affect the analysis of life satisfaction leads to some important conclusions.
    Keywords: Life satisfaction, panel effect, survey design, response bias, interviewer effects
    JEL: C8 I3
    Date: 2013–08
  4. By: Naudé, Wim (Maastricht School of Management); Amorós, José Ernesto (Universidad del Desarrollo); Cristi, Oscar (Universidad del Desarrollo)
    Abstract: We study the effect of entrepreneurship and its allocation between necessity and opportunity entrepreneurship on three indicators of countries' wellbeing: monetary wellbeing, non-monetary wellbeing and our own indicator of a country's ability to translate economic growth into non-monetary wellbeing. We take into consideration that there is a feedback effect from monetary and non-monetary wellbeing to entrepreneurial allocation. Using data from the Global Entrepreneurship Monitor we establish that opportunity entrepreneurship may contribute towards national wellbeing and that better wellbeing in turn may stimulate opportunity entrepreneurship. Hence, entrepreneurship may contribute towards countries' wellbeing in a broad sense, and countries with higher levels of wellbeing may contribute towards opportunity entrepreneurship.
    Keywords: entrepreneurship, wellbeing, development, Global Entrepreneurship Monitor
    JEL: I31 M13 O50
    Date: 2013–08
  5. By: Alan, Piper
    Abstract: This short note discusses two alternative ways to model dynamics in happiness regressions. A explained, this may be important when standard fixed effects estimates have serial correlation in the residuals, but is also potentially useful when serial correlation is not a problem for providing new insights in the happiness of economics area. The note discusses modelling dynamics two ways the note discusses are via a lagged dependent variable, and via an AR(1) process. The usefulness and statistical appropriateness of each is discussed with reference to happiness. Finally, a flow chart is provided summarising key decisions regarding the choice regarding, and potential necessity of, modelling dynamics.
    Keywords: Happiness, Dynamics, Lagged Dependent Variable, AR(1) process, Estimation
    JEL: C23 C50 I31
    Date: 2013–08
  6. By: Tugce Cuhadaroglu (University of St. Andrews)
    Abstract: This paper proposes a new methodology, the Domination Index, to evaluate non-income inequalities between social groups such as inequalities of educational attainment, occupational status, health or subjective wellbeing. The Domination Index does not require specific cardinalisation assumptions, but only uses the ordinal structure of these non-income variables. We approach from an axiomatic perspective and show that a set of desirable properties for a group inequality measure when the variable of interest is ordinal, characterizes the Domination Index up to a positive scalar transformation. Moreover we make use of the Domination Index to explore the relation between inequality and segregation and show how these two concepts are related theoretically.
    Keywords: Between-Group Inequality; Social Inequality; Segregation; Inequality Measurement
    JEL: D63 I14 I24 J15 J16
    Date: 2013–08–12
  7. By: Lohmann, Steffen
    Abstract: This paper examines whether access to modern information technologies, in particular the internet, has an impact on invididual positionality - meaning the degree to which subjective well-being is affected by income relative to others rather than absolute income. We provide empirical evidence that positionality and internet access are intertwined. Exploiting variation over time in a panel of European households, we find stated material aspirations to be significantly positively related to computer access in areas with advanced internet infrastructure. Furthermore, we report cross-sectional evidence from the World Values Survey suggesting an indirect negative effect of internet access on subjective well-being since people who regularly use the internet as a source of information derive less satisfaction from income. Together, the empirical findings highlight the importance of information sets for how individuals evaluate own living conditions relative to others and suggests a vital role for informational globalisation to affect positionality. --
    Keywords: subjective well-being,positionality,relative income,informational globalisation
    JEL: D03 I31
    Date: 2013
  8. By: Strulik, Holger
    Abstract: This paper considers an overlapping generations model of economic growth populated by two types of individuals. Competitive types compare future consumption (i.e. wealth) with the mean. Self-sufficient types derive utility simply from their own consumption and do not compare themselves with others. I derive a condition under which the utility (happiness) of both types increases when the economy is populated by a larger share of competitive types. In the long-run the condition is always fulfilled when the economy is capable of economic growth. The reason for this phenomenon is that competitive types generate higher savings and thus higher aggregate capital stock and income per capita, which raises utility of both types. I show that the result is robust to the consideration of endogenous work effort and that a sufficiently high share of competitive types in a society can be inevitable for long-run economic growth to exist. --
    Keywords: status preferences,happiness,economic growth
    JEL: D90 E21 O40
    Date: 2013
  9. By: Strulik, Holger
    Abstract: In this paper I investigate the nexus between life time utility (life satisfaction) and income predicted by the standard model of endogenous economic growth under different behavioral assumptions. The solution rationalizes why the empirical association between income and life satisfaction is approximately log-linear. I show that the solution is observationally equivalent when individuals compare their consumption (i) with others, (ii) with their own past consumption achievements, and (iii) not at all (ordinary preferences). This finding suggests that the observed slope of the income - life satisfaction curve is uninformative about human behavior driven by referencedependent utility. In particular, the hypothesis that the flattening of the life satisfaction curve at high income levels indicates that people are comparing their consumption too much with others or own past achievements is not supported by the workhorse model of endogenous economic growth. --
    Keywords: status,habit formation,happiness,economic growth
    JEL: D90 E21 O40
    Date: 2013

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