nep-hap New Economics Papers
on Economics of Happiness
Issue of 2015‒09‒05
nine papers chosen by
Viviana Di Giovinazzo
Università degli Studi di Milano-Bicocca

  1. Consumption Smoothing and the Welfare Cost of Uncertainty By Yonas Alem; Jonathan Colmer
  2. Do More of Those in Misery Suffer from Poverty, Unemployment or Mental Illness? By Sarah Flèche; Richard Layard
  3. Losing Hurts: The Happiness Impact of Partisan Electoral Loss By Pierce, Lamar; Rogers, Todd; Snyder, Jason A.
  4. Would you choose to be happy? Tradeoffs between happiness and the other dimensions of life in a large population survey By Matthew D. Adler; Paul Dolan; Georgios Kavetsos
  5. Does consuming more make you happier? Evidence from Chinese panel data By Wang , Haining; Cheng, Zhiming; Smyth , Russell
  6. Job Satisfaction and Employee Turnover: A Firm-Level Perspective By Frederiksen, Anders
  7. Relative Income and Subjective Wellbeing: Intra-national and Inter-national Comparisons by Settlement and Country Type By Arthur Grimes; Marc Reinhardt
  8. IQ and the wellbeing of nations By Salahodjaev, Raufhon
  9. "Infrastructure and Well-being: Employment Effects of Jamuna Bridge in Bangladesh" By Minhaj Mahmud; Yasuyuki Sawada

  1. By: Yonas Alem; Jonathan Colmer
    Abstract: When agents are unable to smooth consumption and have distorted beliefs about the likelihood of future income realisations, uncertainty about future states of the world has a direct effect on individual welfare. However, separating the effects of uncertainty from realised events and identifying the welfare effects of uncertainty both present a number of empirical challenges. Combining individual-level panel data from rural and urban Ethiopia with high-resolution meteorological data, we estimate the empirical relevance of uncertainty on objective consumption and subjective well-being. While negative income shocks affect both objective consumption measures and subjective well-being, greater income uncertainty only has an affect on subjective well-being. A one standard deviation change in income uncertainty is equivalent to a one standard deviation change in realised consumption. These results indicate that the welfare gains from further consumption smoothing are substantially greater than estimates based solely on consumption fluctuations.
    Keywords: Uncertainty, consumption smoothing, subjective well-being
    JEL: D8 O12 I3
    Date: 2015–08
  2. By: Sarah Flèche; Richard Layard
    Abstract: Studies of deprivation usually ignore mental illness. This paper uses household panel data from the USA, Australia, Britain and Germany to broaden the analysis. We ask first how many of those in the lowest levels of life-satisfaction suffer from unemployment, poverty, physical ill health, and mental illness. The largest proportion suffer from mental illness. Multiple regression shows that mental illness is not highly correlated with poverty or unemployment, and that it contributes more to explaining the presence of misery than is explained by either poverty or unemployment. This holds both with and without fixed effects.
    Keywords: Mental health, life-satisfaction, wellbeing, poverty, unemployment
    JEL: I1 I31 I32
    Date: 2015
  3. By: Pierce, Lamar (Washington University in St Louis); Rogers, Todd (Harvard University); Snyder, Jason A. (UCLA)
    Abstract: Partisan identity shapes social, mental, economic, and physical life. Using a novel dataset, we study the consequences of partisan identity by examining the immediate impact of electoral loss and victory on happiness and sadness. Employing a quasi-experimental regression discontinuity model we present two primary findings. First, elections strongly affect the immediate happiness/sadness of partisan losers, but minimally impact partisan winners. This effect is consistent with psychological research on the good-bad hedonic asymmetry, but appears to dissipate within a week after the election. Second, the immediate happiness consequences to partisan losers are relatively strong. To illustrate, we show that partisans are affected two times more by their party losing the 2012 U.S. Presidential Election than both respondents with children were to the Newtown shootings and respondents living in Boston were to the Boston Marathon bombings. We discuss implications regarding the centrality of partisan identity to the self and its well-being.
    Date: 2015–03
  4. By: Matthew D. Adler; Paul Dolan; Georgios Kavetsos
    Abstract: A large literature documents the correlates and causes of subjective well-being, or happiness. But few studies have investigated whether people choose happiness. Is happiness all that people want from life, or are they willing to sacrifice it for other attributes, such as income and health? Tackling this question has largely been the preserve of philosophers. In this article, we find out just how much happiness matters to ordinary citizens. Our sample consists of nearly 13,000 members of the UK and US general populations. We ask them to choose between, and make judgments over, lives that are high (or low) in different types of happiness and low (or high) in income, physical health, family, career success, or education. We find that people by and large choose the life that is highest in happiness but health is by far the most important other concern, with considerable numbers of people choosing to be healthy rather than happy. We discuss some possible reasons for this preference
    Keywords: Happiness; subjective well-being; preferences
    JEL: D6 H00 I00 I31
    Date: 2015–08
  5. By: Wang , Haining (BOFIT); Cheng, Zhiming (BOFIT); Smyth , Russell (BOFIT)
    Abstract: This study examines the relationship between consumption and happiness, using panel data from China Family Panel Studies (CFPS). We find that total consumption expenditure has a significant and positive effect on happiness, but we find no evidence of a non-linear relationship between consumption and happiness. There are heterogeneous effects of consumption on happiness across subsamples and for different types of consumption expendi-ture. We find that relative consumption matters, irrespective if the reference group is defined in terms of consumption at the community or county level or on the basis of age, education and gender. However, the extent to which comparison effects are upward looking, or asymmetric, depend on how the comparison group is defined. We also find that comparison with one’s past consumption has no significant effect on an individual’s happiness.
    Keywords: happiness; consumption; China
    JEL: A13 E21 I31 N35
    Date: 2015–07–24
  6. By: Frederiksen, Anders (Aarhus University)
    Abstract: In this paper, I study an employment situation where the employer and the employees cooperate about the implementation of a job satisfaction survey. Cooperation is valuable because it improves the firm's ability to predict employee quits, but it is only an equilibrium outcome because the employer-employee relation is repeated and long-term. Using a unique combination of firm-level data and information from job satisfaction surveys, the empirical analysis reveals that the cooperation reduces the firm's employee turnover costs significantly by improving its ability to predict quits. This cost reduction may easily exceed the cost of conducting the survey. The analysis also reveals that the firm is willing to sacrifice profits in a given year to be able to sustain the cooperative relationship with the employees.
    Keywords: quits, job satisfaction, cooperation, retention
    JEL: M5
    Date: 2015–08
  7. By: Arthur Grimes (Motu Economic and Public Policy Research); Marc Reinhardt (University of Auckland)
    Abstract: We extend the Easterlin Paradox (EP) literature in two key respects, testing whether inter-national as well as intra-national income comparisons matter for subjective wellbeing, and testing whether these effects differ by settlement-type as well as by country-type. We confirm the intra-national EP predictions (that subjective wellbeing is left unchanged by an equi-proportionate rise in all intra-country incomes) across four developed country settlement types ranging from rural areas to large cities. The EP result also holds for rural areas in transitional countries but not for larger settlement sizes in those countries. For all country-settlement types, we confirm the importance also of inter-national income comparisons in determining people’s subjective wellbeing. Again, however, the effect is less prominent in larger transitional country cities. We also show that once we control for personal characteristics and income-related factors, we cannot reject the presence of a spatial equilibrium in life satisfaction. Our results indicate that each individual government that wishes to raise the life satisfaction of its residents still needs to boost those residents’ incomes in order to raise their subjective wellbeing. However, at least amongst developed countries, this practice results in an international Prisoners Dilemma in which mean life satisfaction stays stable despite rising global incomes.
    Keywords: Income comparison, wellbeing, Easterlin Paradox, spatial equilibrium
    JEL: I31 H39 H24 R13
    Date: 2015–08
  8. By: Salahodjaev, Raufhon
    Abstract: Given the increasing evidence between intelligence and socio-economic outcomes, investigating its effect on wellbeing is crucial. This paper aims to explore the influence of intelligence on individual life satisfaction using data from World Values Survey (WVS). We find evidence that higher-IQ nations are associated with higher levels of individual life satisfaction. In particular, the positive effect of intelligence is stronger in less developed nations. These findings suggest that investing in cognitive skills is socially advantageous.
    Keywords: wellbeing; life satisfaction; intelligence; IQ; cross-country.
    JEL: I3
    Date: 2015
  9. By: Minhaj Mahmud (BRAC Institute of Governance and Development, BRAC University); Yasuyuki Sawada (Faculty of Economics, The University of Tokyo)
    Abstract: We evaluate the impact of the Jamuna multipurpose bridge, the largest physical infrastructure in Bangladesh, on employment opportunities. We particularly focus on labour market integration effects using survey data that provides information on current and retrospective assessments of household situation in two adjacent districts connected by the bridge. Using a quasi-experimental framework of the canonical difference-in-difference regression methodology, we analyse the impact of this infrastructure on employment and job transition patterns. We find that, along with decreasing household unemployment, the bridge construction facilitated farm to non-farm shift of employments. Also the treatment effects are heterogeneous across age, gender and education level. --
    Date: 2015–08

This nep-hap issue is ©2015 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.