nep-hap New Economics Papers
on Economics of Happiness
Issue of 2020‒02‒03
seven papers chosen by

  1. Neighbourhood Deprivation, Life Satisfaction and Earnings: Comparative Analyses of Neighbourhood Effects at Bespoke Scales By Knies, Gundi; Melo, Patricia C.; Zhang, Min
  2. Text as Data: Real-time Measurement of Economic Welfare By Rickard Nyman; Paul Ormerod
  3. Unhappiness and age By David G. Blanchflower
  4. Non-monetary poverty and deprivation: a capability approach By Anand, Paul; Jones, Sam; Donoghue, Matthew; Tietler, Julien
  5. People do not adapt to income changes: A re-evaluation of the dynamic effects of (reference) income on life satisfaction with GSOEP and UKHLS data By Kaiser, Caspar
  6. The puzzle of falling happiness despite rising income in rural China: ten hypotheses By John Knight; Bianjing Ma; Ramani Gunatilaka
  7. Family structure effects on U.S. children’s well-being? Re-examining the family instability hypothesis By Rodríguez Sánchez, Alejandra

  1. By: Knies, Gundi; Melo, Patricia C.; Zhang, Min
    Abstract: We investigate the effect of neighbourhood deprivation on individual subjective and objective wellbeing for England and Wales. Our identification strategy combines rich longitudinal information on individual characteristics, family background and initial job conditions with panel data estimators and sample restrictions, which address residential sorting bias and neighbourhood-specific confounding effects. Our findings suggest that the effect of neighbourhood deprivation on life satisfaction and wages is not a genuine causal effect, but largely explained by strong spatial sorting mechanisms. We also find that the results overall do not vary by the bespoke spatial scale used to operationalize neighbourhoods.
    Date: 2020–01–28
  2. By: Rickard Nyman; Paul Ormerod
    Abstract: Economists are showing increasing interest in the use of text as an input to economic research. Here, we analyse online text to construct a real time metric of welfare. For purposes of description, we call it the Feel Good Factor (FGF). The particular example used to illustrate the concept is confined to data from the London area, but the methodology is readily generalisable to other geographical areas. The FGF illustrates the use of online data to create a measure of welfare which is not based, as GDP is, on value added in a market-oriented economy. There is already a large literature which measures wellbeing/happiness. But this relies on conventional survey approaches, and hence on the stated preferences of respondents. In unstructured online media text, users reveal their emotions in ways analogous to the principle of revealed preference in consumer demand theory. The analysis of online media offers further advantages over conventional survey-based measures of sentiment or well-being. It can be carried out in real time rather than with the lags which are involved in survey approaches. In addition, it is very much cheaper.
    Date: 2020–01
  3. By: David G. Blanchflower
    Abstract: I examine the relationship between unhappiness and age using data from six well-being data files on nearly ten million respondents across forty European countries and the United States. I use fifteen different individual characterizations of unhappiness including despair; anxiety; loneliness; sadness; strain, depression and bad nerves; phobias and panic; being downhearted; having restless sleep; losing confidence in oneself; not being able to overcome difficulties; being under strain; feeling a failure; feeling left out; feeling tense; and thinking of yourself as a worthless person. I also analyze responses to two more general attitudinal measures regarding the situation in the respondent's country as well as on the future of the world. Responses to all these unhappiness questions show a, ceteris paribus, inverted U-shape in age, with controls and many also do so without them. The resiliency of communities left behind by globalization was diminished by the Great Recession which made it especially hard for the vulnerable undergoing a midlife crisis with few resources, to withstand the shock. Unhappiness is hill-shaped in age. There is an unhappiness curve.
    JEL: I31 P51
    Date: 2020–01
  4. By: Anand, Paul; Jones, Sam; Donoghue, Matthew; Tietler, Julien
    Abstract: Given the continuing interest in multi-dimensional approaches to poverty, the paper considers ways in which Senian capability indicators can be used to assess and understand poverty and deprivation. More specifically, we develop novel capability data on 29 dimensions for adults from the US, UK and Italy to explore three core research questions. Firstly, we show that when poverty is seen as capability deprivation, different individuals are identified as poor compared with approaches based on low income or subjective wellbeing. However, we also observe that what the poor report being able to do or otherwise is, nonetheless, relatively robust to the use of these three different approaches. Secondly, we employ latent class analysis to identify poverty and deprivation profiles for groups within society and suggest that such profiles help to identify groups who are deprived with respect to some but not all areas of life. Thirdly, and finally, we examine the association between individual capability deprivation and local area deprivation in the UK. We find that individual capabilities are associated with local area deprivation in some cases but that the connections vary significantly depending on the dimension under consideration. We discuss the results and conclude by suggesting that capability indicators can provide insights into poverty which do emerge from a more traditional approach focussing on income alone.
    Keywords: F00269AB
    JEL: N0
    Date: 2020–01–20
  5. By: Kaiser, Caspar (University of Oxford)
    Abstract: Do people adapt to changes in income? This paper shows that there is no evidence of adaptation to income in GSOEP (1984-2015) and UKHLS (1996-2015) data. Following the empirical approach of Vendrik (2013), I arrive at this surprising answer by estimating (dynamic) life satisfaction equations, in which I simultaneously enter contemporaneous and lagged terms for a respondent's own household income and their estimated reference income. Additionally, I instrument for own income and include lags of a large set of controls. Furthermore, I find that people also do not adapt to changes in reference income. Instead, reference income effects may be subject to reinforcement over time. To explain my findings, a comprehensive account of the puzzling and often divergent results of Ferrer-i Carbonell and Van Praag (2008), Binder and Coad (2010), Di Tella et al. (2010), and Pfaff (2013) is given. What was found to be adaptation to raw household income in these studies turns out to have been driven by reinforcement of an initially small negative effect of household size that grows large over time. Implications of this result for the estimation of equivalence scales with subjective data are discussed.
    Date: 2018–01–03
  6. By: John Knight; Bianjing Ma; Ramani Gunatilaka
    Abstract: With economic development can come social, attitudinal and cultural change, for good or ill or both We pose an unexplored question: why has happiness fallen in rural China whereas rural income has risen rapidly? Two rich data sets are analysed, the rural surveys of the China Household Income Project (CHIP) relating to 2002 and 2013. Our main methods are happiness regressions and decomposition methodology. Several approaches are adopted and no fewer than ten hypotheses are tested. One approach is to examine the variables that are found to be important in happiness functions and to consider their contributions to the fall in the mean happiness score of rural people. Another approach is to analyse the effect on rural happiness of the vast rural-urban migration that took place over this period. This is followed up by introducing tests of the role that changing attitudes might have played.
    Date: 2020–01–22
  7. By: Rodríguez Sánchez, Alejandra
    Abstract: Previous studies have shown that children who grow up in marriage-based twoparent families fare better in terms of their well-being than children who do not. Other researchers have instead argued that these negative effects are confounded by the children’s parents characteristics affecting selection into specific family structure trajectories, which likewise affect the children’s well-being. However, researchers have been unable to account for the complex and dynamic relation between the socioeconomic conditions of individuals and their trajectories of family formation and dissolution. Here I argue that even when researchers account for selection based on observable background characteristics, the negative effect of changes in family structure experienced during childhood on children’s well-being may be biased. Exposure-confounder feedback bias may be present in this association in the form of time-varying confounders such as socioeconomic conditions which affect family transitions and are affected by them dynamically. Data from the Fragile Families and Child Well-being Study is used to empirically show this is the case. Family instability is here considered as a timevarying exposure. Estimations of effects of family transitions on multiple dimensions of children’s well-being are obtained through estimation of doubly robust marginal structural models and inverse probability of treatment weighting. It is shown that most of the effects of family instability are negative with a few noticeable exceptions. But more importantly, the paper shows that the size of these negative effects can be substantially reduced after partially accounting for an idiosyncratic selection of baseline background confounders and exposure-confounder feedback mechanisms. A discussion of these findings, as they relate to the association between socioeconomic conditions and contemporary family dynamics in the U.S., ensues.
    Date: 2019–11–30

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