nep-hap 2019-03-11 papers

on Economics of Happiness

Issue of 2019‒03‒11
two papers chosen by

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

The Effects of Income Transparency on Well-Being: Evidence from a Natural Experiment

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
URL:	http://d.repec.org/n?u=RePEc:nbr:nberwo:25622&r=all

The Relationship between Age and Subjective Well-Being: Estimating Within and Between Effects Simultaneously

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
URL:	http://d.repec.org/n?u=RePEc:old:dpaper:421&r=all

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