nep-hap New Economics Papers
on Economics of Happiness
Issue of 2018‒01‒29
six papers chosen by
Viviana Di Giovinazzo
Università degli Studi di Milano-Bicocca

  1. Neighbors' Income, Public Goods and Well-Being By Abel Brodeur; Sarah Flèche
  2. Subjective well-being and income: A compromise between Easterlin paradox and its critiques By Yasar, Rusen
  3. Entrepreneurial Success and Subjective Well-Being: Worries about the Business Explain One's Well-Being Loss from Self-Employment By Martin Binder
  4. Informal Employment Relationships and the Labor Market: Is there Segmentation in Ukraine? By H. Lehmann; N. Pignatti
  5. Time-in-Labour-Market and the Reference Group By HAURET Laetitia; WILLIAMS Donald R.
  6. Who Got the Brexit Blues? Using a Quasi-Experiment to Show the Effect of Brexit on Subjective Wellbeing in the UK By Powdthavee, Nattavudh; Plagnol, Anke C.; Frijters, Paul; Clark, Andrew E.

  1. By: Abel Brodeur (Department of Economics, University of Ottawa, Ottawa, ON); Sarah Flèche (Aix-Marseille School of Economics, Marseille, France)
    Abstract: How does neighbors' income affect individual well-being? Our analysis is based on rich US local data from the Behavioral Risk Factor Surveillance System, which contains information on where respondents live and their self-reported well-being. We find that the effect of neighbors' income on individuals' self-reported well-being varies with the size of the neighborhood included. In smaller areas such as ZIP codes, we find a positive relationship between median income and individuals' life satisfaction, whereas it is the opposite at the county, MSA and state levels. We provide evidence that local public goods and local area characteristics such as unemployment, criminality and poverty rates drive the association between satisfaction and neighbors' income at the ZIP code level. The neighbors' income effects are mainly concentrated among poorer individuals and are as large as one-quarter the effect of own income on self-reported well-being.
    Keywords: neighbors' income, public goods, amenities, relative deprivation, well-being.
    JEL: C25 J01 R23
    Date: 2017
  2. By: Yasar, Rusen
    Abstract: Despite rising popularity of subjective well-being (SWB) as a proxy for utility, its relationship with income is still unresolved. Against the background of debates around the 'Easterlin paradox', this paper seeks a compromise between two positions: one that insists on individual relative income, and one that finds similarity between individual and aggregate levels. Proposing a model which puts the emphasis on the interaction between individual and aggregate-level factors, it argues that the effect of relative income on SWB varies across countries as a function of average income, in addition to a relatively small direct effect of the latter, in partial agreement with the two major positions. The model is tested cross-sectionally on the data from the latest wave of World Values Survey. The results from hierarchical mixed-effect models confirm the main argument. But further examination reveals that there is still unaccounted variation especially in middle-income economies.
    Keywords: subjective well-being,Easterlin paradox,relative income,national income
    JEL: D31 C31
    Date: 2017
  3. By: Martin Binder
    Abstract: Despite lower incomes the self-employed often report higher job satisfaction. But this increased job satisfaction only sometimes translates into higher life satisfaction, likely due to the heterogeneous nature of self-employment. By distinguishingdifferent types of self-employment, this paper sheds light onto why some self-employeds even report lower life satisfaction, focussing specifically on poor performance enterprises, a prevalent but disregarded type of entrepreneurship. Using German panel data (1984-2015), I find that self-employment (compared to employment) typically negatively impacts on life satisfaction, especially so if one enters self-employment from unemployment, earns low incomes from self-employment or has no employees. Worries about one's financial situation and job security appear to be the driving forces behind this negative effect. Only very few self-employeds report higher life satisfaction, a boost that seems to relate to the pursuit of entrepreneurial opportunities. In sum, looking at the average self-employed obscures the heterogeneity of well-being impacts resulting from different types of self-employment one might find themselves in, and being on the lower end of the success distribution carries a well-being cost instead of bringing joy.
    Keywords: subjective well-being, self-employment, entrepreneurial success, SOEP, life satisfaction
    JEL: I31 L26 J28
    Date: 2017
  4. By: H. Lehmann; N. Pignatti
    Abstract: One of the most important factors that determine individuals’ quality of life and wellbeing is their position in the labor market and the type of jobs that they hold. When workers are rationed out of the formal segment of the labor market against their will, i.e., the labor market is segmented, their quality of life is limited, and their wellbeing is reduced. When they can freely choose between a formal or informal employment relationship, i.e., the labor market is integrated, their wellbeing can reach high levels even in the presence of informal employment. We, therefore, test whether the Ukrainian labor market is segmented along the formal-informal divide, slicing the data by gender and age. The analysis that we perform consist in the analysis of short-term and medium-term transitions between five employment states, unemployment and inactivity. We also analyze wage gaps of mean hourly earnings and across the entire hourly earnings distribution, controlling for time-invariant unobserved heterogeneity. According to our results segmentation is present for dependent employees: for a large part of informal employees informal employment is used as a waiting stage to enter formal salaried employment and is not voluntarily chosen. As far as self-employment is concerned the evidence is mixed regarding in the Ukrainian labor market. This heterogeneity in outcomes implies that not all informal work is associated with a low quality of life and reduced wellbeing in post-transition economies.
    JEL: J31 J40 P23
    Date: 2018–01
  5. By: HAURET Laetitia; WILLIAMS Donald R.
    Abstract: This paper examines the relationship between the time spent in the labour market and the choice of the reference group for making relative income comparisons. The choice of reference group has been found in previous work to be an important determinant of various measures of well-being, including life-satisfaction, job-satisfaction, and satisfaction with pay. We estimate multinomial logit models of reference group determination using data from a survey of working conditions. The results suggest that a greater time spent in the labour market is associated with a higher probability of choosing local workers as the reference group for a sample of foreign ?cross-border? workers. The results are consistent with studies of immigrant workers who are hypothesized to adjust their reference group over time.
    Keywords: reference group; cross-border workers; job satisfaction
    Date: 2018–01
  6. By: Powdthavee, Nattavudh (University of Warwick); Plagnol, Anke C. (City University London); Frijters, Paul (London School of Economics); Clark, Andrew E. (Paris School of Economics)
    Abstract: We use the 2015-2016 waves of the UK Household Longitudinal Study (Understanding Society) to look at subjective wellbeing around the time of the June 2016 EU membership Referendum in the UK (Brexit). We find that those reporting a preference for leaving the EU were 0.14 points less satisfied with life pre-referendum, with both misery (life satisfaction below 5) and job uncertainty significantly predicting the preference for a Leave vote. Post-referendum, those with leave preferences enjoyed a life satisfaction rise of 0.16 points, while there was a drop of 0.15 points for those preferring to remain. The initial positive subjective wellbeing effect of the Brexit vote was particularly pronounced for male and older respondents who reported a preference for leaving the EU. However, adaptation to the Brexit result appears to be complete three months after the EU Referendum date, both for those who preferred continued EU membership and those who did not.
    Keywords: life satisfaction, Brexit, United Kingdom, democracy
    JEL: I14 I30 I31
    Date: 2017–12

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