The happiness gap in Eastern Europe

Citizens in Eastern Europe are less satisfied with life than their peers in other countries. This happiness gap has persisted over time, despite predictions to the contrary by earlier scholars. It holds after controlling for a variety of covariates, such as the standard of living, life expectancy and Eastern Orthodox religion. Armed with a battery of surveys from the early 1990s to 2014, we argue that the happiness gap is explained by how citizens in post-communist countries perceive their governments. Eastern Europeans link their life satisfaction to higher perceived corruption and weaker government performance. Our results suggest that the transition from central planning is still incomplete, at least in the psychology of people.     

Does past unemployment experience explain the transition happiness gap?

The profound economic and political changes of the 1990s had detrimental social effects in many domains of life in post-socialist countries, including diminishing life expectancy and growing unhappiness. Despite economic improvements in the second decade of transition, research has documented that happiness lagged behind. We test whether past unemployment experience can explain this ”transition happiness gap in the context of Ukraine”, a country with a painful delayed transition from planned to market economy. We analyze unique longitudinal data for the period 2003–2012. Current unemployment substantially reduces subjective wellbeing, and the effect is roughly 50% larger for men than for women. The effect of past unemployment is significant, but small in magnitude compared to the effect of current unemployment. However, it does correspond to around 8% of the “transition happiness gap” found by Guriev and Melnikov (2017), suggesting that past unemployment experience can be considered as a partial explanation.     

Adolescents’ (un)happiness in transition

In this paper, we analyse the life satisfaction of adolescents in transition countries, comparing their life satisfaction with that of their peers in non-transition countries. We find that, at the start of transition, ceteris paribus, the life satisfaction of the adolescents in our sample of transition countries is somewhat smaller, but not significantly so, than the life satisfaction of the adolescents in our sample of non-transition countries. With the economic crisis of the early 1990s, however, the difference increased dramatically, but, by the beginning of the 2000s, this gap had again become fairly limited. From that point, respondents’ health situation, their material wealth and their school experience mattered much more than whether they lived in a transition country or not. Unlike the literature on adults, we do not find that after controlling for individual level variables, macro variables play an important role in adolescent happiness.     

Does past unemployment experience explain the transition happiness gap?

The profound economic and political changes of the 1990s had detrimental social effects in many domains of life in post-socialist countries, including diminishing life expectancy and growing unhappiness. Despite economic improvements in the second decade of transition, research has documented that happiness lagged behind. We test whether past unemployment experience can explain this “transition happiness gap in the context of Ukraine”, a country with a painful delayed transition from planned to market economy. We analyze unique longitudinal data for the period 2003–2012. Current unemployment substantially reduces subjective wellbeing, and the effect is roughly 50% larger for men than for women. The effect of past unemployment is significant, but small in magnitude compared to the effect of current unemployment. However, it does correspond to around 8% of the ‘’transition happiness gap” found by Guriev and Melnikov (2017), suggesting that past unemployment experience can be considered as a partial explanation.     

Can religion insure against aggregate shocks to happiness? The case of transition countries

This paper examines the effects of reforms and religion on happiness in transition economies. Earlier literature suggests that religiosity insures happiness against various individual stressful life events. This phenomenon is well-explored in developed countries but rarely studied in post-communist countries, where religion was officially suppressed for a long period. These countries have undergone considerable economic transformations over the past two decades. Using cross-sectional Life in Transition Survey data and historical data on religions, I examine if religion insures against economic reforms. The endogeneity of religion is taken into account. The findings suggest that economic reforms may have both positive and negative effects on happiness. Religiosity indeed insures happiness and perceptions of economic and political situations against economic reforms.     

Transition welfare gaps: One closed,another to follow?

Respondents from post‐communist countries have been found to systematically report lower levels of happiness and self‐rated health. While the first welfare gap in happiness has closed recently, the second transition gap in self‐perceived health only started to close. Specifically, this paper shows that treating all transition countries as a homogeneous group may be misleading and therefore divides 28 transition countries into three groups. As a result, in the most recent 2016 round of the ‘Life in Transition’ survey, transition countries in Southern Europe are no longer found to be different from non‐transition nations in terms of their self‐rated health. Although the gap in self‐perceived health for transition nations in Eastern Europe is present in a basic model, it becomes less statistically and economically significant when subjective beliefs and macro‐level variables are added. Countries from the former Soviet Union and Mongolia remain the only group in which respondents report 16.5%–29.1% lower probability of ‘Good’ or ‘Very Good’ health compared to other transition and non‐transition countries. Controlling for communist party membership, ideological beliefs and macro‐level variables somewhat reduces the gap for the former Soviet Union and Mongolia but it remains significant in multiple robustness checks. Although the gap in self‐rated health now applies to only one group of transition countries, it remains an important empirical puzzle with far‐reaching implications for health policy, demand for healthcare and the process of transition.     

Nonstationarity and Stochastic Stability of Relative Income Clubs

The recent literature on “convergence” of cross‐country per capita incomes has been dominated by the two hypotheses of “global convergence” and “club‐convergence,” pertaining to limits of estimated income distribution dynamics. Utilizing a new measure of “stochastic stability,” we establish two stylized facts regarding short‐ and medium‐term distribution dynamics. The first is non‐stationarity of transition dynamics, in the sense of changing transition kernels, and the second is emergence, disappearance, and re‐emergence of a “stochastically stable” middle income group. This middle income group emerges as the gap between rich and poor clubs gets larger, and it changes the dynamics of transition to and from the rich and poor clubs, eventually narrowing the gap between the poor and rich as the middle club vanishes. Analyzing the stochastic stability of middle‐income groups is thus a first step toward understanding higher‐order dynamics of narrowing or widening of the gap between rich and poor countries.     

新农保养老金政策效果评估——基于老年人生活幸福感的实证研究

作为一项重要的社会保障政策,新农保养老金的效果到底如何,目前学术界还没有统一的评估结论。本文基于2016年中国家庭追踪调查（CFPS）数据,使用断点回归设计的方法,利用老年人幸福感指标对新型农村社会养老保险的政策效果进行了评估。本文从老年人对生活的满意度和自信心两个维度来衡量幸福感,发现领取养老金对其生活满意度的影响尚不显著,但提升了其对未来生活的信心。异质性分析发现东部地区和中高收入地位的老年人在领取新农保养老金后生活幸福感提升较为显著,但现实中挤出效应的影响更大。最后,作为社会支持的新农保与传统的“养儿防老”观念存在一定的替代效应。     

Understanding post-communist transitions: the relevance of Austrian economics

The Review of Austrian Economics - The economic literature about the post-communist transition focused primarily on the debate between gradualism and “shock therapy”, and on issues such...     

What are we learning from the life satisfaction literature?

The recent availability of cross-sectional and longitudinal survey data on life satisfaction in a large number of countries gives us the opportunity to verify empirically (and not just to assume) what matters for individuals and what economists and policymakers should take into account when trying to promote personal and societal well-being. We now have ample evidence, generally robust to different cultural backgrounds, on the effects of some important happiness drivers (income, health, unemployment, marital status, etc.) which can be considered “quasi-stylized facts” of happiness. If economic policies, for many obvious reasons, cannot maximize self-declared life satisfaction as such, we are nonetheless learning a lot from these findings. In particular, results on the relevance of relational goods, on the inflation/unemployment trade-off in terms of welfare and, more in general, on the measurement of the shadow value of non-market goods obtained with life satisfaction estimates are conveying relevant information about individual preferences and what is behind utility functions. Such findings suggest that the anthropological reductionism characterizing most economic models can be misleading and that target indicators of economic policies have to be refocused if we want to minimize the distance between economic development and human progress.     

Material and nonmaterial impacts of the COVID-19 pandemic: Evidence from a low-income country

How have COVID-19-related restrictions affected consumption levels and life satisfaction in low-income countries? We conducted phone surveys with 577 households in Liberia to compare consumption patterns across three points in time: November 2019 (pre-COVID-19), May 2020 (short term), and September 2020 (medium term). This article analyzes the impacts of the Covid-19 pandemic and the related restrictions on food and nonfood consumption, which we categorize as “material” welfare and life satisfaction, which we categorize as “nonmaterial” welfare. We find differences between food and nonfood consumption patterns under pandemic conditions. In particular, consumption by households dependent on food and labor markets was negatively affected by the pandemic. In terms of life satisfaction, we find that most respondents perceived their lives to have worsened due to the pandemic.     

Human capital and life satisfaction in economic transition

This study explores the life satisfaction of Egyptians – with a particular focus on the impact of higher education on happiness – both before and after that country's Arab Spring of 2011. Ordered logit results point to positive and significant relationships between life satisfaction and both perceived high incomes and the human capital variable, good health, for the pre- and post-Arab Spring periods in Egypt, thus confirming prior studies of transition economies. For a second human capital variable – secondary education – the results indicate a positive and significant relationship with happiness in pre-Arab Spring Egypt, while that relationship for post-Arab Spring Egypt is negative and significant. This particular finding is probably the result of the failure of educated Egyptians to achieve a better life despite their investments in human capital – due to the lack of opportunity that accompanied the failure of the country's Arab Spring to change the political and social environment.     

Does transition make you happy?1

This paper analyses life satisfaction in transition countries using evidence from the World Values Survey. The paper demonstrates that individuals in transition economies on average record lower values of self‐reported satisfaction with life compared with those in non‐transition countries. A comparison across time for a smaller sample of countries shows that life satisfaction levels have returned close to pre‐transition levels in most cases, after a dip in the mid‐1990s. The socio‐economic groups that exhibit relatively higher levels of happiness include students, people with higher levels of education and those on higher incomes. Happiness declines with age until the early‐50s and is slow to recover afterwards. Self‐employed people in transition countries show a level of satisfaction as high as, or higher than, full‐time employees, in contrast to evidence from non‐transition countries. In addition, satisfaction levels are highest in those countries where standards of economic governance are most advanced and where inequality is lower.     

Male and Female Happiness in Japan During the 2000s: Trends During Era of Promotion of Active Participation by Women in Society

Female happiness has been paradoxically declining over recent decades in reverse proportion to expanding opportunities for women in developed countries, but this subject has not been explored in Japan. Using JGSS, we found that Japanese women have been slightly happier in both absolute and relative terms to men in the 2000s. While happiness of men aged 35–49 and 65 and over temporarily declined in the first half of the decade, women in age groups 20–34 and 65 and over gained happiness in the second half. Moreover, trends in life satisfaction in terms of economic aspects are similar for men and women, slightly advantageous to men in marriage, and largely advantageous to women in non‐market and non‐family aspects.     

Democracy,regulation and competition in emerging banking systems

This paper develops a political economy framework to analyse the relations among democracy, financial regulation and banking competition in the emerging banking systems of Central and Eastern Europe. We develop extensive new yearly non-structural indices of bank competition instead of concentration indices as in the previous literature that show its evolution over time with the level of democracy. In addition, we directly test for linkages between democracy, financial regulation and banking competition. Using an unbalanced panel data set over the period 1994–2016 for 617 banks, we show that more democratic countries with better regulatory framework lead to the enhancement of competition. We also find significant support for the core hypothesis that financial regulatory framework in a “partially” democratic environment is inadequate. Given that financial regulatory framework in a “partially” democratic environment can be inadequate we find a U-shaped relation in the sense that there is a threshold level of democracy beyond which banking systems in those countries are more competitive.     

Economic Growth Evens Out Happiness: Evidence from Six Surveys

In spite of the great U‐turn that saw income inequality rise in Western countries in the 1980s, happiness inequality has fallen in countries that have experienced income growth (but not in those that did not). Modern growth has reduced the share of both the “very unhappy” and the “perfectly happy.” Lower happiness inequality is found both between and within countries, and between and within individuals. Our cross‐country regression results suggest that the extension of various public goods helps to explain this greater happiness homogeneity. This new stylized fact arguably comes as a bonus to the Easterlin paradox, offering a somewhat brighter perspective for developing countries.     

Election cycles in mining licensing: theory and evidence from Albania

Most of the literature on political business and budgetary cycles (PBBC) has focused on fiscal and monetary policy variables in advanced-country contexts. We extend this literature by investigating political cycle effects in a non-monetary, non-fiscal policy regime (the allocation of mining licences) in a transition country context. We propose a model of mining licensing that allows for corruption and for both supply and demand effects to determine the outcome. We then estimate this model using time-series data from post-communist Albania. Relying on a dynamic Poisson model, we find evidence of both opportunistic and partisan effects. Based on our theory, we suggest a corruption interpretation of political cycles in non-fiscal/non-monetary variables. This interpretation, we suggest, may be more applicable to the context of developing and transition countries. Our study raises important questions about the unintended (and often pernicious) effects of transition politics on economic regulation and economic performance in post-socialist economies.     

Do Exchange Rate Shocks Have Asymmetric Effects on Reserve Accumulation? Evidence from Emerging Markets*

It is generally argued that central banks in emerging market countries, motivated by a desire to defend export competitiveness, tend to intervene in foreign exchange markets to limit currency appreciations rather than depreciations. Using panel data from 13 emerging market countries for the period 1998:M1 to 2016:M12, we find that exchange rate shocks play an important role in determining the accumulation of international reserves. Moreover, we find evidence that central banks in emerging markets tend to follow a “leaning against the depreciation wind” policy, rather than the appreciation wind (i.e., we provide evidence of a “fear of depreciation”).     

Self-employment,financial development,and well-being: Evidence from China,Russia, and Ukraine

This study investigates the association between financial development and entrepreneurs’ well-being in China, Ukraine, and Russia. We find that Chinese and Russian entrepreneurs have a higher level of well-being, while Ukrainian self-employed individuals have more dissatisfaction. The link between financial development and the utility of entrepreneurs varies as well. The utility differences between the self-employed and paid workers in Russia reduce with financial development and the effect is stronger for job satisfaction. However, financial development barely correlates with Ukrainian entrepreneurs’ happiness while having no correlation with life satisfaction of Chinese self-employed. Further investigation suggests that the financial development – entrepreneurial utility association works through both monetary and non-monetary channels.     

What drives German foreign direct investment? New evidence using Bayesian statistical techniques

Despite the importance of Germany as an issuer of foreign direct investment (FDI), the studies analyzing its determinants are far from conclusive. This research contributes to filling this gap providing new evidence for the period 1996–2012. In order to reduce model uncertainty, we adopt a Bayesian model averaging (BMA) approach. We find that determinants associated with horizontal FDI appear to be dominant for explaining FDI in developed countries while for the group of developing countries covariates associated with vertical FDI motives play a larger role. Within Europe, while the majority of FDI is horizontally driven in “core” countries, in the “periphery” vertical motivations seem to prevail. Moreover, our results are compatible with more complex FDI models where vertical determinants and institutional variables are gaining prominence as does the leading role currently played by Germany in global value chains (GVC). Our results may provide hints for policymakers’ strategies to attract German investment.