New Economics Papers
on Economics of Happiness
Issue of 2014‒02‒15
ten papers chosen by

  1. The Median Is the Message: A Good-Enough Measure of Material Well-Being and Shared Development Progress By Nancy Birdsall and Christian J. Meyer
  2. Characterising competitive equilibrium in terms of opportunity By Robert Sugden
  3. Life Satisfaction, Ethnicity and Neighbourhoods: Is There an Effect of Neighbourhood Ethnic Composition on Life Satisfaction? By Lucinda Platt; Gundi Knies; Alita Nandi
  4. Trust as a Key Variable of Sustainable Development and Public Happiness: A Historical and Theoretical Example Regarding the Creation of Money By Nicola Genovese; Maria Grazia La Spada
  5. Towards an operational measurement of socio-ecological performance By Claudia Kettner; Angela Köppl; Sigrid Stagl
  6. Is Human Development Index (HDI) a reflector of quality of air? a comparative study on developed and developing countries By Santra, Swarup
  7. Migration, remittances and household welfare in Ethiopia By Andersson L.
  8. All in the Family: How Do Social Capital and Material Wellbeing Affect Relational Wellbeing? By Martina Menon; Ravi Pendakur; Federico Perali
  9. Longitudinal Evidence for a Midlife Nadir in Human Wellbeing: Results from Four Data Sets By Cheng, Terence C; Powdthavee, Nattavudh; Oswald, Andrew J

  1. By: Nancy Birdsall and Christian J. Meyer
    Abstract: We argue that survey-based median household consumption expenditure (or income) per capita be incorporated into standard development indicators, as a simple, robust, and durable indicator of typical individual material well-being in a country. Using household survey data available for low- and middle-income countries from the World Bank’s PovcalNet tool, we show that as a measure of income-related well-being, it is far superior to the commonly used GDP per capita as well as survey-based measures at the mean. We also argue that survey-based median measures are “distributionaware”, i.e. when used as the denominator of various widely available indicators such as mean consumption expenditure per capita they provide a “good-enough” indicator of consumption (or income) inequality. Finally, as a post-2015 indicator of progress at the country-level in promoting shared development and reducing inequality, we propose that the rate of increase in median consumption per capita after taxes and transfers exceed the rate of increase in average consumption in the same period.
    Keywords: welfare measure, median, consumption, inequality, distribution
    JEL: D31 H22 I32 O15
    Date: 2014–01
  2. By: Robert Sugden (University of East Anglia, UK)
    Abstract: This paper is the first draft of a technical appendix to a chapter of a book I am writing, with the provisional title The Community of Advantage. The central argument of the book will be that many elements of the (classically) liberal tradition of normative economics do not depend on assumptions about individual rationality, and so it is possible for a behavioural economist to work in that tradition. I will propose an approach to normative economics that differs both from neoclassical welfare economics and from the various variants of soft paternalism that are currently being proposed by behavioural economists. My approach has two distinctive features. First, it is written from a contractarian perspective. That is, it is addressed to citizens as potential parties to mutually beneficial agreements, and not to an imagined benevolent despot or social planner. (A first draft of this part of the argument has been published as Sugden [2013].) Second, its normative criterion is opportunity, not welfare, happiness or well-being. Sections 1 to 4 of this paper follow the analysis in McQuillin and Sugden (2012), specialised to the one-period case and with minor changes in notation. The set-up, and the definition of the ‘opportunity criterion’ are slightly different from those used in Sugden (2004). The differences are explained in McQuillin and Sugden (2012). The argument in Section 5 is new.
    Date: 2014
  3. By: Lucinda Platt (Department of Social Policy, London School of Economics and Political Science); Gundi Knies (Institute for Social and Economic Research, University of Essex); Alita Nandi (Institute for Social and Economic Research, University of Essex)
    Abstract: Using a rich, nationally representative data set with a large sample of minorities and matched small area characteristics, we explore differences in life satisfaction for ethnic groups living in UK. We test the hypothesis that minorities will be less satisfied, which will in part be explained by less favourable individual and area contexts, but that living in areas with a larger proportion of own ethnic group promotes well-being. We find that satisfaction is lower among minorities, ceteris paribus, but area concentration is associated with higher life satisfaction for certain groups. We discuss the implications of our findings.
    Keywords: Life Satisfaction, Happiness, Ethnic group, Neighbourhood, Subjective well-being, UKHLS
    JEL: I31 J15 R23 O15
    Date: 2014–02
  4. By: Nicola Genovese (Professor of Economics, University of Messina); Maria Grazia La Spada (University of Messina, Department of Economics, SEAM)
    Abstract: This article purports to trace the origin of money on the basis of factors in interpersonal relationships, affecting a sustainable development and public happiness, namely trust, reciprocity and the concept of we-rationality. Both the historical approach and the one based on traditional economic theory have been found inadequate mainly because they did not take into account these factors. The hypothesis expounded in the paper is that these values underlaid the beginning of economic activity. Initially economic activity was carried out within small human groups. In such groups interpersonal relations were not based on individual self-interest. As a matter of fact, there is historical evidence supporting the notion that the first exchanges were gift-giving and were made possible by trust and reciprocity as expounded by Polanyi (1957) and Sudgen (2000) among others. When the exchanges strengthened between elements of various groups all with the same values and moral characteristics the process toward the creation of money started, without any intrinsic value and the presence of any superior authority. In the paper it is also hypothesized that the creation of money is one of the basic factors in the progress of economic and social activity, together with ancient phenomena as language ad writing. Finally, the paper advocates that in future the economic activity be permeated by those moral values on which a sustainable development can be based. This will, in turn, increase the rate of economic and social growth.
    Keywords: Sustainable Development, Public Happiness, Origin of Money, Behaviour Economics, Exchanges Between Primitive Populations
    JEL: Q01 A13 B15 E
  5. By: Claudia Kettner; Angela Köppl; Sigrid Stagl
    Abstract: Questioning GDP as dominant indicator for economic performance has become commonplace. For economists economic policy always aims for a broader array of goals (like income, employment, price stability, trade balance) alongside income, with income being the priority objective. The Stiglitz-Sen- Fitoussi Commission argued for extending and adapting key variables of macroeconomic analysis. International organisations such as the EC, OECD, Eurostat and UN have proposed extended arrays of macroeconomic indicators (see ‘Beyond GDP’, ‘Compendium of wellbeing indicators’, ‘GDP and Beyond’, 'Green Economy', 'Green Growth', 'Measuring Progress of Societies'). Despite these high profile efforts, few wellbeing and environmental variables are in use in macroeconomic models. The reasons for the low uptake of socio-ecological indicators in macroeconomic models range from path dependencies in modelling, technical limitations, indicator lists being long and unworkable, choices of indicators appearing ad hoc and poor data availability. In this paper we review key approaches and identify a limited list of candidate variables and – as much as possible – offer data sources.
    Keywords: Academic research, Beyond GDP, Biophysical constraints, Ecological integrity, Economic growth path, Socio-ecological transition, Wealth, Wellbeing
    JEL: D6
    Date: 2014–02
  6. By: Santra, Swarup
    Abstract: Economic Indicators alone cannot capture the totality of ‘Quality of Life’ (QOL). The Most acceptable Measure of QOL is the ‘Human Development Index’ (HDI) of UNDP. HDI is a composite Index of three Indicators of three essential dimensions of life. These three indicators are of per capita GDP adjusted to purchasing power, life expectancy at birth, and adult literacy rate(including the gross school enrollment ratios). While, the measurement of HDI is considered as a measure of Human well-being, it ignores the other dimension of life, which is the quality of natural environment. Human being lives within this natural environment. In a polluted environment, human being cannot be stay well. In this study, it was examined whether the Quality of Air is Reflected through the HDI or not. In this study, the result has been come out that the Quality of Air is reflected through the HDI only for the Developing Countries. But, in case of Developed Countries, the Quality of Air is not reflected through the HDI.
    Keywords: Composite Index for Quality of Air(CIQA), Human Development Index (HDI), Principal Component Analysis(PCA), Spearman’s Rank correlation Coefficient
    JEL: O15 Q53
    Date: 2014–01–15
  7. By: Andersson L. (UNU-MERIT)
    Abstract: This paper investigates the effect of international remittances and migration on household welfare in Ethiopia. We employ both subjective a households subjective economic well-being and objective measures asset holdings and asset accumulation to define household welfare. A matching approach is applied to address self-selection, and by exploiting information before and after the households began receiving remittances, the study sheds light on the changes in welfare associated with international migration and remittances. The results reveal that remittances have a significant impact on a welfare variable that has previously not received much attention in the migration literature, namely household subjective economic well-being. In addition, we find that remittances have positive effects on consumer asset accumulation, especially in rural areas, but no effect on productive assets.
    Keywords: International Migration; Remittances; Economic Development: Human Resources; Human Development; Income Distribution; Migration;
    JEL: F22 F24 O15
    Date: 2014
  8. By: Martina Menon (Department of Economics (University of Verona)); Ravi Pendakur (University of Ottawa (Canada)); Federico Perali (Department of Economics (University of Verona))
    Abstract: We use a unique dataset from Italy to investigate the impact of socioeconomic characteristics and social capital on family wellbeing and satisfaction. We assess wellbeing using four dimensions of satisfaction with family life: satisfaction with decision making processes, with relationships with partner and children, and with time spent with children. Social capital is measured through information about membership in organizations, trust, and interactions with others. We find that while socioeconomic characteristics and equivalent income in general do not have an impact on family wellbeing, social capital matters for family life satisfaction.
    Keywords: Subjective wellbeing, Relational satisfaction, Social capital.
    JEL: D19 I31 Z13
    Date: 2014–02
  9. By: Cheng, Terence C (University of Melbourne); Powdthavee, Nattavudh (London School of Economics and Political Science); Oswald, Andrew J (Department of Economics, University of Warwick)
    Abstract: There is a large amount of cross-sectional evidence for a midlife low in the life cycle of human happiness and well-being (a ‘U shape’). Yet no genuinely longitudinal inquiry has uncovered evidence for a U-shaped pattern. Thus some researchers believe the U is a statistical artefact. We re-examine this fundamental cross-disciplinary question. We suggest a new test. Drawing on four data sets, and only within-person changes in well-being, we document powerful support for a U-shape in unadjusted longitudinal data without the need for regression equations. The paper’s methodological contribution is to exploit the first-derivative properties of a well-being equation. Key words: Life-cycle happiness ; subjective well-being ; longitudinal study ; U shape JEL classification: I31 ; D01 ; C18
    Date: 2014
  10. By: Dorsett, Richard (National Institute of Economic and Social Research); Oswald, Andrew J (Department of Economics, University of Warwick)
    Abstract: Many politicians believe they can intervene in the economy to improve people’s lives. But can they? In a social experiment carried out in the United Kingdom, extensive in-work support was randomly assigned among 16,000 disadvantaged people. We follow a sub-sample of 3,500 single parents for 5 ensuing years. The results reveal a remarkable, and troubling, finding. Long after eligibility had ceased, the treated individuals had substantially lower psychological wellbeing, worried more about money, and were increasingly prone to debt. Thus helping people apparently hurt them. We discuss a behavioral framework consistent with our findings and reflect on implications for policy Key words: JEL classification: I31 ; D03 ; D60 ; H11 ; J38
    Date: 2014

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.