nep-hap New Economics Papers
on Economics of Happiness
Issue of 2016‒04‒16
eight papers chosen by

  1. Consumption Smoothing and the Welfare Cost of Uncertainty By Yonas Alem; Jonathan Colmer
  2. A Penalized Spline Estimator for Fixed Effects Panel Data Models By Peter Pütz; Thomas Kneib
  3. How Important is the Type of Working Contract for Job Satisfaction of Agency Workers? By René Pettiliot
  4. The Unintended Long-term Consequences of Mao’s Mass Send-Down Movement: Marriage, Social Network, and Happiness By Shun Wang; Weina Zhou
  5. Multidimensional Well-being and Regional Disparities in Europe By J. Döpke; A. Knabe; Cornelia Lang; Philip Maschke
  6. Money, Social Capital and Materialism. Evidence from Happiness Data By Piekalkiewicz, Marcin
  7. Wellbeing Evidence for the Assessment of Progress By Anand, Paul; Roope, Laurence; Peichl, Andreas
  8. Subjective wellbeing impacts of national and subnational fiscal policies By Arthur Grimes; Judd Ormsby; Anna Robinson; Siu Yuat Wong

  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 effect 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: Peter Pütz; Thomas Kneib
    Abstract: Estimating nonlinear effects of continuous covariates by penalized splines is well established for regressions with cross-sectional data as well as for panel data regressions with random effects. Penalized splines are particularly advantageous since they enable both the estimation of unknown nonlinear covariate effects and inferential statements about these effects. The latter are based, for example, on simultaneous confidence bands that provide a simultaneous uncertainty assessment for the whole estimated functions. In this paper, we consider fixed effects panel data models instead of random effects specifications and develop a first-difference approach for the inclusion of penalized splines in this case. We take the resulting dependence structure into account and adapt the construction of simultaneous confidence bands accordingly. In addition, the penalized spline estimates as well as the confidence bands are also made available for derivatives of the estimated effects which are of considerable interest in many application areas. As an empirical illustration, we analyze the dynamics of life satisfaction over the life span based on data from the German Socio-Economic Panel (SOEP). An open source software implementation of our methods is available in the R package pamfe.
    Keywords: First-difference estimator, life satisfaction, panel data, penalized splines, simultaneous confidence bands
    Date: 2016
  3. By: René Pettiliot
    Abstract: Previous research has found that agency workers are less satisfied with their job than regular workers on a permanent contract. All these studies have in common that they treat agency workers as a homogeneous group; that is, they did not consider the contract type agency workers hold. This paper analyzes whether differences in job satisfaction can be explained by the contract type using data from the German Socio-Economic Panel. The analysis leads to three main results. First, differences in job satisfaction cannot be explained by the contract type. Second, agency workers on a permanent contract are significantly less satisfied with their job than regular workers on the same contract. Third, agency workers on a fixed-term contract do not differ in reported job satisfaction from regular workers on both fixed-term and permanent contracts. These findings give rise to the hypothesis that as a policy instrument agency employment appears to be well-suited for short-term periods, but it should be prevented that workers are persistently employed in such a work arrangement.
    Keywords: Job satisfaction, temporary agency employment, fixed-term contracts, permanent contracts
    JEL: C23 I31 J28 J41
    Date: 2016
  4. By: Shun Wang (Korea Development Institute (KDI) School of Public Policy and Management, 263 Nansojeong-ro, Sejong, Korea); Weina Zhou (Department of Economics, Dalhousie University, 6214 University Avenue, Halifax, NS, Canada)
    Abstract: This paper uses the China General Social Survey (CGSS) 2003 to evaluate the long-term consequences of a forced migration, the state’s “send-down” movement (shang shan xia xiang, or up to the mountains, down to the villages) during the Chinese Cultural Revolution, on individuals’ nonmaterial well-being. The send-down program resettled over 16 million urban youths to the countryside to carry out hard manual labor over the years 1968-1978. Most of them were allowed to return to urban areas when the Cultural Revolution ended. We find that those who had the send-down experience have worse marriage outcome, lower-quality social network, and lower level of happiness than their non-send-down counterparts. The negative effects of the forced migration are robust against a detailed set of family backgrounds and personal characteristics.
    Keywords: Send-down movement, Forced migration, Marriage, Social network, Happiness
    JEL: I31 J12 J18 J61
    Date: 2016–04
  5. By: J. Döpke; A. Knabe; Cornelia Lang; Philip Maschke
    Abstract: Using data from the OECD Regional Well-Being Index – a set of quality-of-life indicators measured at the sub-national level, we construct a set of composite well-being indices. We analyse the extent to which the choice of five alternative aggregation methods affects the well-being ranking of regions. We find that regional inequality in these composite measures is lower than regional inequality in gross-domestic product (GDP) per capita.
    Keywords: well-being, regional economic policy, EU structural funds, composite index
    JEL: C31 I31 R10
    Date: 2016–04
  6. By: Piekalkiewicz, Marcin
    Abstract: Are unhappiness, high concern for money and scarcity of social capital different faces of the same phenomenon? Economists tend to treat these variables as distinct correlates of well-being. On the contrary, positive psychologists argue that they all relate to materialism, a system of personal values ascribing great importance in life to extrinsic motivations and low priority to intrinsic motivations. Using data from two European cross-sectional surveys and the German Socio-Economic Panel, I test the hypothesis that material interests, proxied by the effects of individual and reference income on well-being, are associated with low levels of social capital. The results suggest that people with scarce social capital tend to have greater material interests, whereas the negative effect of income comparisons on well-being is eliminated for individuals exhibiting the highest levels of social capital. The implication of such finding is that promoting social capital reduces people's material concerns and has positive impact on their well-being. The results from a country-level analysis additionally show that, since social capital moderates the importance of income for well-being on individual level, the well-being gap between income groups is significantly smaller in countries with higher social capital.
    Keywords: subjective well-being,life satisfaction,social capital,materialism,relative income,social comparisons,happiness inequality
    JEL: D31 I31 Z13
    Date: 2016–03–23
  7. By: Anand, Paul (The Open University); Roope, Laurence (University of Oxford); Peichl, Andreas (ZEW Mannheim)
    Abstract: In recent years considerable interest has developed in going 'beyond GDP' to develop measures of economic progress which are more explicitly based on human wellbeing. This work has been inspired, in part, by Sen's non-utilitarian approach to welfare economics, but has been constrained by a lack of empirical indicators relating to human potential. In this paper, therefore, we develop a framework for understanding wellbeing, drawing closely on Sen's seminal contributions to welfare economics, as well as the economic literature on life satisfaction, and use it to generate novel data for the USA and UK consistent with all the components of the theory. We use these data to illustrate some of the life quality analyses that might follow. Specifically, we investigate how various indicators of capability are distributed by ethnicity and gender, and compare and contrast the types of capability which appear relatively strong/weak within each country. In addition, we consider the extent to which life satisfaction and daily activities depend on resources and non-cognitive skills. The paper concludes that with an expansion of the scope of routinely collected survey data, it is feasible to empirically implement fully Sen's theory to provide a much richer account of the wellbeing outcomes that derive from economic progress than is currently the case.
    Keywords: wellbeing, stochastic dominance, life satisfaction, Sen
    JEL: D60 I31
    Date: 2016–03
  8. By: Arthur Grimes (Motu Economic and Public Policy Research); Judd Ormsby (Motu Economic and Public Policy Research); Anna Robinson (Motu Economic and Public Policy Research); Siu Yuat Wong (University of Auckland)
    Abstract: We study the association between fiscal policy and subjective wellbeing using fiscal data on 35 countries and 130 country-years, combined with over 170,000 people’s subjective wellbeing scores. While past research has found that ‘distortionary taxes’ (e.g. income taxes) are associated with slow growth relative to ‘non-distortionary’ taxes (GST/VAT), we find that distortionary taxes are associated with higher levels of subjective wellbeing than non-distortionary taxes. This relationship holds when we control for macro-economic variables and country fixed effects. If this relationship is causal, it would offer an explanation as to why governments pursue these policies even when they harm economic growth. We find that richer people’s subjective wellbeing is less harmed by indirect taxes than for people with lower incomes, while “unproductive expenditure” is associated with higher wellbeing for the middle class relative to others, possibly reflecting middle class capture. We see little evidence for differential effects of fiscal policy on people living in different sized settlements. Devolving a portion of expenditure to subnational government is associated with higher subjective wellbeing but devolving tax collection to subnational government is associated with monotonically lower subjective wellbeing.
    Keywords: Subjective wellbeing; Fiscal policy; Decentralised government
    JEL: D60 E62 H50 H70 O57
    Date: 2016–04

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