nep-hap New Economics Papers
on Economics of Happiness
Issue of 2013‒12‒15
seven papers chosen by
Viviana Di Giovinazzo
University of Milano-Bicocca

  1. ‘Small area estimates of Subjective Wellbeing: Spatial Microsimulation on the Australian Unity Wellbeing Index Survey’ By Itismita Mohanty; Robert Tanton; Yogi Vidyattama; Marcia Keegan; Robert Cummins
  2. Optimal Expectations and the Welfare Cost of Climate Variability By Alem, Yonas; Colmer, Jonathan
  3. Relative Standing and Life-Satisfaction: Does Unobserved Heterogeneity Matter? By Alem, Yonas
  4. A Vibrant European Labor Market with Full Employment By Ritzen, Jo; Zimmermann, Klaus F.
  5. Remittances and Well-Being among Rural-to-Urban Migrants in China By Alpaslan Akay; Corrado Giulietti; Juan D. Robalino; Klaus F. Zimmermann
  6. Nominal or Real? The Impact of Regional Price Levels on Satisfaction with Life By Deckers, Thomas; Falk, Armin; Schildberg-Hörisch, Hannah
  7. Religiosity as a determinant of happiness By Erich Gundlach; Matthias Opfinger

  1. By: Itismita Mohanty (NATSEM, University of Canberra); Robert Tanton (NATSEM, University of Canberra); Yogi Vidyattama (NATSEM, University of Canberra); Marcia Keegan (NATSEM, University of Canberra); Robert Cummins (Deakin University)
    Abstract: Subjective wellbeing is an indicator of how satisfied a person is with their life. It is becoming accepted as an indicator of happiness and overall wellbeing. This paper uses spatial microsimulation methods to estimate small area subjective wellbeing (SWB) in Australia. The procedure uses the Australian Unity Wellbeing Index survey and the 2011 Census data to derive small area estimates of SWB. Validation of the results shows that high and normal levels of SWB compare well to another source of SWB for small areas in the Murray Darling Basin, but levels of low SWB are not predicted as well, possibly due to the effect of local factors not available for the modelling on reducing SWB. Aggregate estimates compare well to HILDA estimates of SWB at a State level. These estimates are now available from the Australian Urban Research Infrastructure Network (AURIN) at the University of Melbourne..
    Keywords: Wellbeing, Regional welfare, Spatial Microsimulation
    JEL: I31 R13 C63
    Date: 2013–12
  2. By: Alem, Yonas (Department of Economics, School of Business, Economics and Law, Göteborg University); Colmer, Jonathan (the Grantham Research Institute and Dept of Geography and Environment, London School of Economics, UK)
    Abstract: Uncertainty about the future is an important determinant of well-being,especially in developing countries where financial markets and other market failures result in ineffective insurance mechanisms. However, separating the effects of future uncertainty from realised events, and then measuring its impact on utility presents a number of empirical challenges. This paper addresses these issues and shows that increased climate variability (a proxy for future income uncertainty) reduces farmers’ subjective well-being, consistent with the theory of optimal expectations (Brunnermeier & Parker, 2005), using panel data from rural Ethiopia and a new data set containing daily atmospheric parameters. The magnitude of our result indicates that a one standard deviation (7%) increase in climate variability has an equivalent effect on life satisfaction to a two standard deviation (1-2%) decrease in consumption. This effect is one of the largest determinants of life satisfaction in rural Ethiopia.
    Keywords: climate variability; uncertainty; subjective well-being; fixed effects
    JEL: C25 D60 I31
    Date: 2013–12–10
  3. By: Alem, Yonas (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: Unlike most studies of subjective well-being in developing countries, we use a fixed effects regression on three rounds of rich panel data to investigate the impact of relative standing on life satisfaction of respondents in urban Ethiopia. We find a consistently large negative impact of relative standing - both relative to others and to oneself over time - on subjective well-being. However, controlling for unobserved heterogeneity through a fixed effects model reduces the impact of the relative standing variables on subjective well-being by up to 24 percent and reduces the impact of economic status by about 40 percent. Our findings highlight the need to be cautious in interpreting parameter estimates from subjective well-being regressions based on cross-sectional data, as the impact of variables may not be disentangled from that of unobserved heterogeneity.
    Keywords: life satisfaction; urban Ethiopia; relative standing; fixed effects
    JEL: I30 I31 O12
    Date: 2013–12–10
  4. By: Ritzen, Jo (IZA and Maastricht University); Zimmermann, Klaus F. (IZA and University of Bonn)
    Abstract: We sketch a visionary strategy for Europe in which full employment is quickly regained by 2020, where income inequality is reduced and the economies are more sustainable. We name this scenario "vibrant." It is contrasted with what would happen if present policies continue within the European Union (EU) and its member states. In the vibrant scenario, full employment is regained by more policy attention toward innovation and its underlying research and development (R&D), accompanied by more labor mobility within and between EU countries, in combination with a selective immigration policy based on labor market shortages. The road to full employment is embedded in a landscape with less income inequality and more "greening" of EU member states' economies. We translate the vibrant scenario into policy proposals distinguishing between the role for the EU and that of the member states. We hope these proposals will be included in the election programs for the upcoming 2014 European Parliament elections and in developing the mandate for the new European Commission in December 2014.
    Keywords: employment, labor mobility, innovation, income inequality, competition, labor markets, greening, happiness
    JEL: D31 D33 F55 I23 I24 I25 I28 J11 J18 J21 J31 J64 J83 O31 O38 O52
    Date: 2013–12
  5. By: Alpaslan Akay (Institute for the Study of Labor); Corrado Giulietti (Institute for the Study of Labor); Juan D. Robalino (Cornell University); Klaus F. Zimmermann (Institute for the Study of Labor)
    Abstract: The main objective of this paper is to propose a systematic approach to empirically analyse the relationship between sending remittances and the utility of migrants, as proxied by their subjective well-being (SWB). Using data from a new survey on China, we estimate models in which a SWB measure is regressed on the level of remittances, finding a sizeable positive correlation. The estimates vary 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, finding evidence that both altruistic and contractual motivations are at work among rural-to-urban migrants in China.
    Keywords: Migrants, subjective well-being, remittances
    JEL: J61 D64 I3
    Date: 2013–02
  6. By: Deckers, Thomas; Falk, Armin; Schildberg-Hörisch, Hannah
    Abstract: According to economic theory, real income, i.e., nominal income adjusted for purchasing power, should be the relevant source of life satisfaction. Previous work, however, has only studied the impact of inflation adjusted nominal income and not taken into account regional differences in purchasing power. Therefore, we use a novel data set to study how regional price levels affect satisfaction with life. The data set comprises about 7 million data points that are used to construct a price level for each of the 428 administrative districts in Germany. We estimate pooled OLS and ordered probit models that include a comprehensive set of individual level, time-varying and time-invariant control variables as well as control variables that capture district heterogeneity other than the price level. Our results show that higher price levels significantly reduce life satisfaction. Furthermore, we find that a higher price level tends to induce a larger loss in life satisfaction than a corresponding decrease in nominal income. A formal test of neutrality of money, however, does not reject neutrality of money. Our results provide an argument in favor of regional indexation of government transfer payments such as social welfare benefits.
    Keywords: Life satisfaction; price index; neutrality of money
    JEL: D60 C23 D31
    Date: 2013–10–15
  7. By: Erich Gundlach; Matthias Opfinger
    Abstract: The empirical relation between happiness and religiosity is considered from the perspective of basic utility theory. An unbalanced cross-country panel data set is used to study whether religiosity can be considered as a substitute in the happiness function, which itself is held to be a proxy for the utility function. We find that the same level of happiness can be maintained with high and low levels of religiosity due to substitution along a standard indifference curve. Our empirical results are consistent with three stylized facts of the empirical literature, namely a positive correlation between happiness and religiosity, a positive correlation between happiness and income, and a negative correlation between religiosity and income.
    Keywords: Happiness, religiosity, utility function, long-run development
    JEL: I31 Z12 O11
    Date: 2012

This nep-hap issue is ©2013 by Viviana Di Giovinazzo. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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.