New Economics Papers
on Economics of Happiness
Issue of 2013‒09‒13
five papers chosen by

  1. Unmet Aspirations as an Explanation for the Age U-Shape in Human Wellbeing By Hannes Schwandt
  2. Parental benefits improve parental well-being: evidence from a 2007 policy change in Germany By Mikko Myrskylä; Rachel Margolis
  3. Self-Reported Satisfaction and the Economic Crisis of 2007-10: Or How People in the UK and Germany Perceive a Severe Cyclical Downturn By Antje Mertens; Miriam Beblo
  4. Effects of Early Childhood Intervention on Maternal Employment, Fertility and Well-Being. Evidence from a Randomized Controlled Trail By Sandner, Malte
  5. New Evidence on Subjective Wellbeing and the Definition of Unemployment in South Africa By Neil Lloyd; Murray Leibbrandt

  1. By: Hannes Schwandt
    Abstract: A large literature in behavioral and social sciences has found that human wellbeing follows a U-shape over age. Some theories have assumed that the U-shape is caused by unmet expectations that are felt painfully in midlife but beneficially abandoned and experienced with less regret during old age. In a unique panel of 132,609 life satisfaction expectations matched to subsequent realizations, I find people to err systematically in predicting their life satisfaction over the life cycle. They expect -- incorrectly -- increases in young adulthood and decreases during old age. These errors are large, ranging from 9.8% at age 21 to -4.5% at age 68, they are stable over time and observed across socio-economic groups. These findings support theories that unmet expectations drive the age U-shape in wellbeing.
    Keywords: Life satisfaction, expectations, aging
    JEL: A12 I30 D84
    Date: 2013
  2. By: Mikko Myrskylä (Max Planck Institute for Demographic Research, Rostock, Germany); Rachel Margolis
    Abstract: Family policies aim to influence fertility and labor force participation, and support families. However, often only fertility and labor supply are considered in policy evaluations. For example, the 2007 extension of parental leave benefits in Germany is generally considered unsuccessful because changes in fertility and labor force participation were modest. However, parental wellbeing is also important, in itself and as a determinant of child well-being. This paper is the first to consider the effect of parental leave policies on parental well-being. We analyze the German 2007 parental benefits reform and find that the extension of benefits strongly increased parental well-being around the birth of a child. The effect is observed for first and second births and for various sub-populations. A placebo test using data from Britain where there was no policy change supports the causal interpretation. Our results cast the success of the German 2007 policy change in new light. Parental leave benefits have an important direct impact on parental wellbeing.
    Keywords: Germany, parenthood
    JEL: J1 Z0
    Date: 2013–08
  3. By: Antje Mertens; Miriam Beblo
    Abstract: Self-reported satisfaction measures respond to a great variety of socio-demographic characteristics as well as the job and living environment. In this paper we ask whether the recent financial market crisis has caused a deterioration of satisfaction not only for the unemployed but also for those out of the labour force and especially those in employment. The focus of our analyses is on the pattern of life, job and health satisfaction over time and the influence of unemployment rates, inflation rates and GDP growth. We compare the UK and Germany, two countries with different employment protection regulations and different consequences of the crisis for the labour market. For our analysis we use data from the German Socio-Economic Panel (SOEP) and the British Household Panel Study (BHPS) for the period 1996 to 2010 and supplement this with annual information on macroeconomic indicators. We estimate Ordered Logit and OLS models, both with individual fixed effects. We were somewhat surprised to find significant differences between the formerly separated parts of Germany even twenty years after re-unification – not only in satisfaction but also its determinants. While people living in the western part of Germany report somewhat lower satisfaction in 2009 compared to the previous years, those living in the eastern part report higher levels than in 2006, the year before the financial crisis started. This could be due to the largely different employment structures in both parts of Germany. As exports and not so much services were hit by the crisis, western German federal states were facing stronger negative demand pressures. Our findings for the UK are similar to the East German evidence, as year dummies for the crisis years 2008 to 2010 do not show any sign of a decrease, except for a fall in job satisfaction in 2010. Looking at the impact of macroeconomic indicators such as GDP growth, inflation and unemployment, we find mostly diverse effects between the two German regions but similar between West Germany and the UK. First of all, satisfaction with life is related to the business cycle, we observe positive reactions to an increase in GDP in the whole of Germany and negative reactions to rising inflation in the UK and Germany. However, the strongest and most robust result concerns the relationship between self-reported satisfaction and the regional unemployment rate: The higher regional unemployment the more satisfied people in East Germany seem to be irrespective their current labour market status. Both unemployed and employed seem to be more satisfied with their lives, jobs and health when unemployment is rising around them. At the same time, the overall level of unemployment has a significantly negative effect. In West Germany and the UK, on the contrary, the reverse is true: overall unemployment is positively related to satisfaction and regional unemployment in West Germany is negatively related. Interestingly, we get similar though somewhat weaker results when looking at job and health satisfaction. Hence, though the direct costs of the financial and economic crisis in form of falling GDP seem to have been by far larger than the psychological costs, we find some limited additional costs in the crisis years, and a considerable impact of regional and national unemployment rates.
    Keywords: Happiness, life satisfaction, subjective well·being, business cycles, crisis
    JEL: D60 E30 I31 J60 Z13
    Date: 2013
  4. By: Sandner, Malte
    Abstract: This paper presents results from a randomized evaluation of a home visiting program for disadvantaged first-time mothers and their families implemented in three German federal states. I analysis the impact of the intervention on maternal employment, school attendance, child care use, fertility, life-satisfaction and well-being. Biannual telephone interviews with the participating mothers until the third birthday of the child give a rich data source to evaluate these outcomes. I find that the intervention increases fertility and maternal life-satisfaction and well-being, whereas the treatment does not affect maternal employment, school attendance and child care use. These results are in contrast to previous studies from the US where home visiting programs decreased fertility.
    Keywords: Early Childhood Intervention, Randomized Experiment, Fertility
    JEL: J13 J12 I21 H52
    Date: 2013–08
  5. By: Neil Lloyd (SALDRU, University of Cape Town, South Africa); Murray Leibbrandt (SALDRU, School of Economics, University of Cape Town)
    Abstract: Access to new nationally-representative, individual-level panel data from South Africa has allowed for the revalidation of Kingdon and Knight's (2006) discussion on the definition of unemployment. This paper investigates subjective wellbeing as a measure of comparison between labour market statuses. It finds that on the grounds of subjective wellbeing the non-searching unemployed (or 'discouraged') are significantly worse-off than the not-economically-active. Moreover, evidence suggests that with regard to the relationship between life satisfaction and labour market status, the 'discouraged' have 'hit rock bottom'. This paper therefore advocates for the inclusion of the non-searching unemployed in the labour force and the use of a broad definition of unemployment, on the grounds that rational individuals would not self select into a lower state of wellbeing.
    Date: 2013

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