Are optimistic expectations keeping the Chinese happy?

In this paper we study the effect of optimistic income expectations on life satisfaction amongst the Chinese population. Using a large scale household survey conducted in 2002 we find that the level of optimism about the future is particularly strong in the countryside and amongst rural-to-urban migrants. The importance of these expectations for life satisfaction is particularly pronounced in the urban areas, though also highly significant for the rural area. If expectations were to reverse from positive to negative, we calculate that this would have doubled the proportion of unhappy people and reduced proportion of very happy people by 48 per cent. We perform several robustness checks to see if the results are driven by variations in precautionary savings or reverse causality.     

International inequality in subjective well‐being: An exploration with the Gallup World Poll

In this paper we compute inequality measures over the distribution of a subjective well‐being variable constructed from a life satisfaction question included in the Gallup World Poll in almost all countries in the world. We argue that inequality in subjective well‐being may be a better proxy for the degree of unfairness in a society than income inequality. We find evidence that inequality in subjective well‐being has an inverse‐U relationship with per capita GDP , but it is monotonically decreasing with respect to mean subjective well‐being. We argue that this difference might be associated to inequality aversion in the space of utility.     

Heterogeneity in the Relationship between Happiness and Age: Evidence from the German Socio‐Economic Panel

This paper studies the evolution of life satisfaction over the life course in Germany. It clarifies the causal interpretation of the econometric model by discussing the choice of control variables and the underidentification between age, cohort and time effects. The empirical part analyzes the distribution of life satisfaction over the life course at the aggregated, subgroup and individual level. To the findings: On average, life satisfaction is mildly decreasing up to age 55 followed by a hump shape with a maximum at 70. The analysis at the lower levels suggests that people differ in their life satisfaction trends, whereas the hump shape after age 55 is robust. No important differences between men and women are found. In contrast, education groups differ in their trends: highly educated people become happier over the life cycle, where life satisfaction decreases for less‐educated people.     

Neighbors' Income,Public Goods,and Well‐Being

How does neighbors' income affect individual well‐being? Our analysis is based on rich U.S. local data from the Behavioral Risk Factor Surveillance System, which contains information on where respondents live and their self‐reported well‐being. We find that the effect of neighbors' income on individuals' self‐reported well‐being varies with the size of the neighborhood included. In smaller areas such as ZIP codes, we find a positive relationship between median income and individuals' life satisfaction, whereas it is the opposite at the county, MSA, and state levels. We provide evidence that local public goods and local area characteristics such as unemployment, criminality, and poverty rates drive the association between satisfaction and neighbors' income at the ZIP code level. The neighbors' income effects are mainly concentrated among poorer individuals and are as large as one quarter of the effect of own income on self‐reported well‐being.     

Education and happiness: an alternative hypothesis

Recent research has documented a negative relationship between education and happiness. We test the hypothesis that the extent to which education makes an individual happy depends on their current age in life. We find suggestive evidence that people with higher education are more likely to be happier, on average, than their less educated counterparts starting in their early to mid-30s.     

The subjective well-being of workfare participants: insights from a day reconstruction survey

In this article, we shed more light on the subjective well-being of workfare participants and compare it to the well-being of unemployed and employed workers. We use data from a self-conducted survey among participants in workfare schemes in Germany. We examine two subdimensions of subjective well-being – life satisfaction and emotional well-being – separately to obtain a more comprehensive view of the subjective well-being of workfare participants. Our results show that the life satisfaction of people in this group is between that of employed and unemployed people. In contrast, their emotional well-being is the highest of these three groups.     

Entrepreneurship in post‐conflict transition1

We examine new self‐employment entry and its viability in Bosnia and Herzegovina, using a rich household survey for the years 2001–2004. We find that wealthier households are more likely to engage in viable self‐employment and create employment suggesting an important role for financing constraints. Specifically, although having an existing bank relationship is not significantly related to the entry decision, it is positively related to the survival for new entrepreneurs and their employment creation. We also find a non‐linear relationship between remittances and entry in that individuals not receiving remittances are more likely to enter self‐employment; but, if they do receive them, the likelihood of starting a business increases in the fraction of wealth received from domestic remittances. Finally, people working in the informal sector are more likely to become viable entrepreneurs, particularly those provided with loans from micro‐credit organizations. These findings support the perception of the informal sector as an incubator for formal self‐employment in the early years of transition.     

Differences in the effects of informal family caregiving on health and life satisfaction between wives and husbands as caregivers

We analyze whether or not informal family caregiving worsens caregivers’ health and life satisfaction among Japanese married middle‐aged and elderly individuals from the Japanese Study of Aging and Retirement. Unlike previous studies, we distinguish between wives and husbands as caregivers and between one's own and one's spouse's parents as care recipients. We find women's depressive state is negatively associated with caregiving for spousal parents both in our instrumental variable estimations and fixed‐effect panel analysis, and also find women's life satisfaction is negatively associated with caregiving for spousal parents in our fixed‐effect panel analysis, though only marginally so. However, as our results are marginally significant, caregiving for either own or spousal parents does not seem to matter much for caregiver's health or life satisfaction. All that can be said for certain in our paper is that men's subjective health, depressive state, and life satisfaction are generally less sensitive to informal care, for both spousal and own parents, than that of women.     

Should income transfers be targeted or universal? Insights from public pension influences on elderly mortality in Canada, 1921–1966

Abstract. We investigate the impact of Canada's means‐tested and universal public pension programs on the mortality rates of age groups eligible for pension benefits for the period 1921–1966. We find that only the universal program significantly reduced pension eligible age group mortality rates. The implied social value of the mortality risk reduction from this program is one‐tenth of the value per statistical life associated with contemporary government policy, meaning that Canadians did not need to place a high value on the life of a senior to justify the higher cost of the universal program. JEL classification: I3, J1     

Retirement Expectations and Satisfaction with Retirement Provisions

This paper investigates the relationship between subjective expectations regarding the replacement rate of income at retirement and several measures of pension satisfaction. We use panel data on Dutch employees, analyzed with fixed effects models, allowing for correlation between unobserved heterogeneity in satisfaction and optimism or pessimism in expectations. The level of the expected replacement rate is found to be positively related to satisfaction: respondents who revise their expectations of the level of their replacement rate upwards tend to become more satisfied with their pension provisions, in particular with the level of the expected benefits. We do not find robust evidence for a relationship between uncertainty and pension satisfaction.     

Happiness and loss aversion: Is utility concave or convex in relative income?

A central finding in happiness research is that a person's life satisfaction depends on the level of her income relative to the average income in her social reference group. This dependence of life satisfaction on relative income can be related to the reference dependence of the value function in Kahneman and Tversky's [Kahneman, D., Tversky, A., 1979. Prospect theory: an analysis of decision under risk. Econometrica 47, 263–291] prospect theory. In this paper we investigate whether the characteristics of the value function like concavity for gains, convexity for losses, and loss aversion apply to the dependence of life satisfaction on relative income. This is tested with an improved measure for the reference income for a large German panel spanning the years 1984–2001. We find concavity of life satisfaction in positive relative income, but unexpectedly strongly significant concavity of life satisfaction in negative relative income as well. We also present a new method to show the robustness of these concavity results to extreme distortions of the reported-life-satisfaction scale. The concavity for negative relative income implies a rising marginal sensitivity of life satisfaction to more negative values of relative income, and hence loss aversion (in a wide sense). This may be explained in terms of increasing financial obstacles to social participation.     

Earnings distribution,corporate governance and CEO pay

We investigate the relationship between earnings differentials and the pay of CEOs of 190 British companies between 1970 and 1990. We find that (i) changes in the differential between the 90th and 50th weekly earnings percentiles for non‐manual adult male workers [90:50] explain changes in the level of real CEO salary and bonus in our sample of companies; (ii) changes in this differential also account for changes in the elasticity of CEO pay to firm size; (iii) a broader measure of earnings inequality does far worse than 90:50 at explaining changes in both the level and the firm size elasticity of CEO pay; (iv) fitting the model on data for 1970–1983 and predicting pay levels for the period starting with the widespread adoption of executive share option schemes in 1984, we find a structural break in the relationship between lower management pay differentials and the pay of the CEO. We conclude first that top executive pay prior to 1984 was a stable function of both firm size and earnings differentials lower on the administrative ladder, consistent with a hypothesis advanced by Herbert Simon in 1957; and second that the use of share options from 1984 onward represents not simply a change in the mode of top executive compensation, but a de‐linking of the pay of top executives and that of their subordinates.     

Who stays,who goes,who returns?

We study the determinants of East–West migration within Germany during the period 1990–2006, using administrative data, the German Microcensus and the German Socio‐Economic Panel. We find that in addition to income prospects and employment status, two well‐known determinants of migration, psychological and social factors play an important role in determining the migration decision. Men and women move from East to West in proportionate numbers, but among individuals who lived in the East in 1989 women are more likely to migrate. The migrant body in the second wave of migration, starting in the late 1990s, is increasingly composed of young, educated people. By focusing on differences between temporary and permanent migrants, we find that older and single individuals are more likely to return East than stay permanently in the West, compared with younger and married individuals. Finally, the life satisfaction of permanent migrants increases significantly after a move, while that of temporary migrants remains essentially flat.     

LIFE SATISFACTION AND INCOME INEQUALITY

Do people care about income inequality and does income inequality affect subjective well‐being? Welfare theories can predict either a positive or a negative impact of income inequality on subjective well‐being and empirical research has found evidence of a positive, negative, or non‐significant relation. This paper attempts to determine some of the possible causes of such empirical heterogeneity. Using a very large sample of world citizens we test the consistency of the effect of income inequality in predicting life satisfaction. We find that income inequality has a negative and significant effect on life satisfaction. This result is robust to changes of regressors and estimation choices and also persists across different income groups and across different types of countries. However, this relation is easily obscured or reversed by multicollinearity generated by the use of country and year fixed effects. This is particularly true if the number of data points for inequality is small, which is a common feature of cross‐country or longitudinal studies.     

THE MORTALITY COST OF EXPENDITURES

This paper updates the mortality cost of expenditures, which has relevance to a broad range of policies, including regulations, wars, and COVID‐19 restrictions. Because changes in income lead to changes in mortality risk, health investments costing more per life saved than a threshold cost‐per‐life‐saved cutoff level are expected to increase mortality risk. This article discusses the mechanisms driving this relationship and provides recent empirical support. The 2019 cost‐per‐life‐saved cutoff level at which expenditures increase mortality risk has a lower bound of $83.1 million and an upper bound of $133.8 million, with a midpoint of $108.5 million. (JEL D61, I18, J17, K32)     

Changes in health-related quality of life: a compensating income variation approach

This paper investigates the relationship between negative changes in health and life satisfaction, using a sample from the Household, Income and Labour Dynamics of Australia Survey. We use panel data models and estimate the life satisfaction impact of several different changes in health status to calculate the Compensating Income Variation (CIV) of them. Our work innovates with respect to the existing literature by using a more robust CIV method that takes account of the potential measurement error in income. Further, we produce the first set of monetary values for health losses using SF-6D utility values, one of the main measures used to estimate and value health change for economic evaluation. We show that negative changes in SF-6D are significantly associated with a reduction in life satisfaction, and the starting point matters: a drop of 0.1 in SF-6D score is associated with a decrease of 0.12 points in life satisfaction if the starting utility value is 0.8, but the effect is 100% higher if the SF-6D starting point is 0.7. More generally, we find that a 0.1 deterioration in SF-6D has a strong association with life satisfaction and that the CIV value is substantial (over US$ 120,000).     

The company you keep: Satisfaction with life,economic freedom,and preference-policy mismatch

We examine the interaction between individual preferences for markets and state-level economic freedom as it relates to Satisfaction with Life (SWL). Fundamental tenets of economic freedom assert that societies free of excessive government involvement are wealthier and, ultimately, happier; individuals who are allowed to pursue self-interest are argued to be more motivated and more productive, and so society as a whole is better off. Though there is substantial empirical evidence that freer societies are wealthier, the evidence connecting economic freedom and happiness is less clear. We explore the relationship between economic freedom and SWL at the individual level. We examine differences between personal preferences for free markets and state policy and how this ‘preference-policy mismatch’ is related to SWL. We then briefly examine the relationship between preference-policy mismatches and individual self-reported voting behavior, including implications for Tiebout sorting. This study is the first to focus on individual economic ideology, i.e. individual level of support for free markets, and SWL in the United States. Combining individual and state level data we offer improvements to prior studies in a number of areas including an enhanced measure of life satisfaction, a richer basis for examining left-right differences than simple political identification, and an examination of the effect of preference-policy mismatches on satisfaction with life. We find significant relationships between SWL and individual support for markets, state-level economic freedom, and preference-policy mismatch. Further, preference-policy mismatch is positively associated with self-reported voting frequency. We find little support for Tiebout sorting.     

The Australian Growth Experience, 1960–2000: Human Capital,R&D or Steady‐State Growth?

This article examines the sources of economic growth in Australia from 1960 to 2000 by adapting a framework developed in Jones (2002), whereby long‐run growth is driven by the global discovery of new ideas, which in turn is tied to world population growth. We find that, contrary to the conventional view as suggested by sustained growth rates and a stable capital–output ratio over the last several decades, Australia is clearly not on its steady–state balanced growth path. Australia has benefited from increases in educational attainment and research intensity: 42 per cent of Australian growth between 1960 and 2000 is attributable to the rise in educational attainment, about 20 to 40 per cent is attributable to increasing research intensity, while only 10 to 30 per cent is due to long‐run population growth in the idea‐producing countries.     

Commitment and satisfaction in the classroom and on the field: evidence from a Division I liberal arts college

Within higher education, there has been a persistent concern that student-athlete commitments to their athletic activities are detrimental to their academic studies. We collect data on student-athletes from a selective liberal arts university with Division I athletics where the expectations and levels of commitment to academics and athletics can be substantial. We fail to find any relationship between athletic experiences and time allocations to athletics or academics, but we do observe that individuals who exhibit greater levels of commitment in general, and to academics in particular, devote more time per week to academics and perform better as measured by grade point average. The only evidence of a trade-off between athletics and academics arises for individuals who report difficulty in managing and fulfilling their obligations who devote fewer hours to academics and perform worse academically. We also find that satisfaction with athletic experiences is correlated with interpersonal relationships and the athlete’s role on his/her team whereas satisfaction with academics depends upon the influence that he/she has over training. However, this flexibility does not translate into improved academic performance. The results suggest that universities concerned with adverse impacts of athletics upon academic performance should focus on policies that promote time and task management skills.     

Income comparison and happiness: The role of fair income distribution

Relative income gap is one of the most popular approaches for explaining the income–happiness relationship. We argue in this article that when people compare their incomes, they care about distributional fairness more than relative income disparity. It is difficult for us to explain China's income–happiness paradox if we simply compare the income gap and do not explore the income‐generation process leading to income inequality. We therefore employ an approach based on a responsibility‐sensitive theory of justice that decomposes individual income into fair and unfair components. As a proxy for distributional unfairness, unfair income is considered the main source of unhappiness. Using data from the Chinese Household Income Project survey, we find strong support for the negative relationship between income unfairness and happiness. We also find a significantly positive relationship between the relative income gap and income unfairness, which leads us to consider the income comparison hypothesis as the explanation for the income–happiness paradox in a new light. Sensitivity analyses confirm the robustness of our results.