nep-hap New Economics Papers
on Economics of Happiness
Issue of 2019‒03‒11
two papers chosen by
Viviana Di Giovinazzo
Università degli Studi di Milano-Bicocca

  1. The Effects of Income Transparency on Well-Being: Evidence from a Natural Experiment By Ricardo Perez-Truglia
  2. The Relationship between Age and Subjective Well-Being: Estimating Within and Between Effects Simultaneously By Philipp Biermann; Juergen Bitzer; Erkan Goeren

  1. By: Ricardo Perez-Truglia
    Abstract: In 2001, Norwegian tax records became easily accessible online, allowing everyone in the country to observe the incomes of everyone else. According to the income comparisons model, this change in transparency can widen the gap in well-being between richer and poorer individuals. We test this hypothesis using survey data from 1985–2013. Using multiple identification strategies, we show that the higher transparency increased the gap in happiness between richer and poorer individuals by 29%, and it increased the life satisfaction gap by 21%. We provide suggestive evidence that some, although probably not all, of this effect relates to changes in self-perceptions of relative income. We provide back-of-the-envelope estimates of the importance of income comparisons, and discuss implications for the ongoing debate on transparency policies.
    JEL: D03 D31 D60 D83 I31 Z10
    Date: 2019–02
  2. By: Philipp Biermann (Otto von Guericke University Magdeburg); Juergen Bitzer (University of Oldenburg, Department of Economics); Erkan Goeren (University of Oldenburg, Department of Economics)
    Abstract: Based on data from the German Socio-Economic Panel (SOEP), we used a correlated random effects econometric framework to simultaneously estimate the within and between effects of age on subjective well-being. The proposed approach overcomes the ambiguity in the relationship between age and subjective well-being reported in a series of studies based on cross-sectional and/or longitudinal panel data. Our results suggest that a cubic-type functional relationship between well-being and age fits the data best, leading to highly significant coefficient estimates associated with the age variables, and consistent within and between effects of age on subjective well-being. A linear or quadratic functional relationship between well-being and age is not empirically supported, as the between and within estimates of age on well-being differ significantly from each other. The main findings are robust to the inclusion of a broad range of individual-level sociological, demographic, and economic controls, and to the inclusion of various interviewer controls such as survey experience, survey type, and interviewer fixed effects.
    Keywords: Subjective Well-Being, Life Cycle Happiness, Cohort Effects, Mundlak Approach, Correlated Random Effects, Fixed Effects, Between- and Within-Person Effects
    Date: 2019–03

This nep-hap issue is ©2019 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.