nep-hap New Economics Papers
on Economics of Happiness
Issue of 2021‒06‒14
five papers chosen by

  1. Development policy based on happiness? A review of concepts, ideas and pitfalls By Renz, Timon
  2. Social Comparisons; the behavioural component By Ana I. Moro Egido
  3. Effectiveness, Spillovers, and Well-Being Effects of Driving Restriction Policies By Luis Sarmiento; Nicole Wägner; Aleksandar Zaklan
  4. Emotions and Risk Attitudes By Armando N. Meier
  5. National Development Delivers: And How! And How? By Lant Pritchett

  1. By: Renz, Timon
    Abstract: Happiness research, which has been strongly represented in the social sciences for some years, also offers opportunities for application in public policy. Consequently, there are already considerations to evaluate development policy by the yardstick of subjective well-being. This paper aims to provide an overview of the applications of happiness to development issues and to elicit both opportunities and pitfalls of such a policy. As a result, numerous problems associated with happiness research become apparent - conceptually, technically, and even ideologically. It is probably too early to proclaim a new paradigm of a "Happiness Development Policy". Thus, the paper also deals with what might still have to be done for a meaningful application.
    Keywords: Happiness Research,Development Policy
    Date: 2021
  2. By: Ana I. Moro Egido (Department of Economic Theory and Economic History, University of Granada.)
    Abstract: The relative income hypothesis states that what matters for subjective well-being is not only one’s absolute level of income, but comparisons with others’ income as well. However, the related literature has disregarded the behavioural component. We propose a theoretical model of the relative income hypothesis which incorporates a behavioural effect that interacts with the standard comparisons effect. Using the Spanish Survey of Household Finances (SHF) for the period 2002-2017, we test the theoretical implications and find that the behavioural effect may explain why upward and downward comparisons are not effective when we compare with other individuals whose income is close enough. This effect holds in terms of income, but not in terms of wealth when both are dimensions of comparisons. Wealth deprivation is significant and negative for any interval of comparison. We add two additional empirical tests; dynamic comparisons and components of wealth. Comparisons with those who surpass my level of resources or from those who I surpass have no effect. The components of wealth which affect subjective well-being are real assets and, to a lesser extent, financial assets. There is no effect from non-real estate or real estate debt.
    Keywords: Static and dynamic relative hypothesis, income and wealth components, behavioural component, subjective well-beings.
    JEL: C29 D31 I31
    Date: 2021–05–30
  3. By: Luis Sarmiento; Nicole Wägner; Aleksandar Zaklan
    Abstract: We study the effectiveness, spillovers, and well-being effects of low emission zones in Germany, an emission-intensity-based driving restriction rapidly growing in popularity. Using regression discontinuity and group-time difference-in-differences designs, we show that previous estimates of the policy’s impact on traffic-related air pollution significantly underestimate its effectiveness. We provide evidence of beneficial and harmful policy spillovers to neighboring areas, and increases in ozone due to changes in the chemical balance with precursor contaminants. Policy effects are heterogeneous by season, with greater decreases in traffic pollutants during winter and increases in ozone during spring and summer. Using individual-level data from the German Socio-Economic Panel, we further find that the policy decreases subjective well-being despite clear evidence of health benefits. The decline in well-being is especially pronounced in the first year after policy implementation and is transitory.
    Keywords: Low emission zones, air pollution, well-being, health, group-time differencein-differences, regression discontinuity
    JEL: Q53 Q58 I31 I18
    Date: 2021
  4. By: Armando N. Meier
    Abstract: Previous work has shown that preferences are not always stable across time, but surprisingly little is known about the reasons for this instability. I examine whether variation in people’s emotions over time predicts changes in risk attitudes. Using a large panel data set, I identify happiness, anger, and fear as significant correlates of within-person changes in risk attitudes. Robustness checks indicate a limited role of alternative explanations. An event study around the death of a parent or child further confirms a large relationship between emotions and risk attitudes.
    Keywords: Emotions, happiness, risk attitudes, risk preferences, preference stability, SOEP
    JEL: D01 D90 D91
    Date: 2021
  5. By: Lant Pritchett (Center for International Development at Harvard University)
    Abstract: Core dual ideas of early development economics and practice were that (a) national development was a four-fold transformation of countries towards: (i) a more productive economy, (ii) a more responsive state, (iii) more capable administration, and (iv) a shared identity and equal treatment of citizens and (b) this four-fold transformation of national development would lead to higher levels of human wellbeing. The second idea is strikingly correct: development delivers. National development is empirically necessary for high wellbeing (no country with low levels of national development has high human wellbeing) and also empirically sufficient (no country with high national development has low levels of human wellbeing). Three measures of national development: productive economy, capable administration, and responsive state, explain (essentially) all of the observed variation in an omnibus indicator of wellbeing, the Social Progress Index, which is based on 58 distinct non-economic indicators. How national development delivers on wellbeing varies, in three ways. One, economic growth is much more important for achieving wellbeing at low versus high levels of income. Two, economic growth matters more for “basic needs” than for other dimensions of wellbeing (like social inclusiveness or environmental quality). Three, state capability matters more for wellbeing outcomes that depend on public production than on private goods (and for some wellbeing indicators, like physical safety, for which growth doesn’t matter at all). While these findings may seem too common sense to be worth a paper, national development--and particularly economic growth—is, strangely, under severe challenge as an important and legitimate objective of action within the development industry.
    Keywords: national development
    Date: 2021–05

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