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Abstract:
We study the effect of the level of inequality in society on individual well being using a total of 123,668 answers to a survey question about ?happiness?. We find that individuals have a lower tendency to report themselves happy when inequality is high, even after controlling for individual income, a large set of personal characteristics, and year and country (or, in the case of the US, state) dummies. The effect, however, appears to be stronger in Europe than in the US. In addition we find a striking difference across groups. In Europe, the poor and those on the left of the political spectrum are unhappy about inequality; whereas in the US the happiness of the poor and of those on the left is uncorrelated with inequality. Interestingly, in the US it is the rich who are especially bothered by inequality. We argue that these findings are consistent with the perception (not necessarily the reality) that Americans have of living in a mobile society, where individual effort can move people up and down the income ladder, while Europeans believe that they live in less mobile societies.

Abstract:
The answer to the question posed in the title is "yes." Using a total of 128,106 answers to a survey question about "happiness," we find that there is a large, negative and significant effect of inequality on happiness in Europe but not in the US. There are two potential explanations. First, Europeans prefer more equal societies (inequality belongs in the utility function for Europeans but not for Americans). Second, social mobility is (or is perceived to be) higher in the US so being poor is not seen as affecting future income. We test these hypotheses by partitioning the sample across income and ideological lines. There is evidence of "inequality generated" unhappiness in the US only for a sub-group of rich leftists. In Europe inequality makes the poor unhappy, as well as the leftists. This favors the hypothesis that inequality affects European happiness because of their lower social mobility (since no preference for equality exists amongst the rich or the right). The results help explain the greater popular demand for government to fight inequality in Europe relative to the US.

Inequality, happiness, redistribution

Abstract:
The answer to the question posed in the title is "yes". Using a total of 128,106 answers to a survey question about happiness, we find that there is a large, negative and significant effect of inequality on happiness in Europe but not in the US. There are two potential explanations. First, Europeans prefer more equal societies (inequality belongs in the utility function for Europeans but not for Americans). Second, social mobility is (or is perceived to be) higher in the US so being poor is not seen as affecting future income. We test these hypotheses by partitioning the sample across income and ideological lines. There is evidence of inequality generated unhappiness in the US only for a sub-group of rich leftists. In Europe inequality makes the poor unhappy, as well as the leftists. This favors the hypothesis that inequality affects European happiness because of their lower social mobility (since no preference for equality exists amongst the rich or the right). The results help explain the greater popular demand for government to fight inequality in Europe relative to the US.

Abstract:
This paper shows that macroeconomic movements have strong effects on the happiness of nations. First, we find that there are clear microeconomic patterns in the psychological well-being levels of a quarter of a million randomly sampled Europeans and Americans from the 1970's to the 1990's. Happiness equations are monotonically increasing in income, and have a similar structure in different countries. Second, movements in reported well-being are correlated with changes in macroeconomic variables such as Gross Domestic Product. This holds true after controlling for the personal characteristics of respondents, country fixed-effects, year dummies, and country-specific time trends. Third, the paper establishes that recessions create psychic losses that extend beyond the fall in GDP and rise in the number of people unemployed. These losses are large. Fourth, the welfare state appears to be a compensating force: higher unemployment benefits are associated with higher national well-being.

Well-being, Happiness, Macroeconomics, Costs of Business Cycles, Unemployment Insurance

Abstract:
The Easterlin Paradox refers to the fact that happiness data are typically stationary in spite of considerable increases in income. This amounts to a rejection of the hypothesis that current income is the only argument in the utility function. One possible answer is that human development involves more than current income (e.g., as argued by the UN). We find that the happiness responses of almost 400,000 people living in the OECD during 1975-1997 are positively correlated with absolute income, the generosity of the welfare state and (weakly) with life expectancy; it is negatively correlated with the average number of hours worked, measures of environmental degradation (SOx emissions), crime, openness to trade, inflation and unemployment; all after controlling for country and year dummies. The estimated effects separate across groups in a manner that appears broadly plausible (e.g., the rich suffer environmental degradation more than the poor). Based on their actual change, the biggest contributors to happiness in our sample have been the increase in income and the increase in life expectancy. Our accounting exercise suggests that the unexplained trend in happiness is even bigger than would be predicted if income was the only argument in the utility function. In other words, introducing omitted variables worsens the income-without-happiness paradox.

Income, subjective well-being, quality of life

Abstract:
Happiness data can help in evaluating the economic importance of "behavioural" theories. Using individual panel data on up to 7,812 people living in Germany from 1984 to 2000, we illustrate the approach by estimating the size of the effect on happiness of adaptation to income and to status. We cannot reject the null hypothesis that people adapt totally to income after four years. By comparison, significant status effects remain after this time. In the short-run (current year) a one standard deviation increase in status is associated with a similar increase in happiness to an increase of 49% of a standard deviation in income. In the long run (past four years) a one standard deviation increase in status has a similar effect to an increase of 328% of a standard deviation in income. We also discuss some evidence consistent with loss aversion.

Happiness, psychology, adaptation to income, adaptation to status

Abstract:
We introduce a new data set on hiring and firing restrictions for 21 OECD countries for the period 1984-90. The data are based on surveys of business people in the countries covered, so the indices we use are subjective in nature. Controlling for country and time fixed effects, and using dynamic panel data techniques, we find evidence that increasing the flexibility of the labor market increases both the employment rate and the rate of participation in the labor force. A conservative estimate suggests that if France were to make its labor markets as flexible as those in the US, its employment rate would increase 1.6 percentage points, or 14% of the employment gap between the two countries. The estimated effects are larger in the female than in the male labor market, although both groups seem to have similar long run coefficients. There is also some evidence that more flexibility leads to lower unemployment rates and to lower rates of long-term unemployment. We also find evidence consistent with the hypothesis that inflexible labor markets produce "jobless recoveries" and introduce more unemployment persistence.

Job Security Provisions, Subjective Data, Employment, Unemployment

Abstract:
A fundamental issue for economists is what determines civil conflict. One unsettled question is the relative importance of political freedoms versus economic development. This paper takes a new approach to provide an answer by using micro-data based on surveys of revolutionary preferences of 130,000 people living in 61 nations between 1980 and 1997. Controlling for personal characteristics, country and year fixed effects, more freedom and economic growth both reduce revolutionary support. Losing one level of freedom, equivalent to a shift from the US to Turkey, increases support for revolt by 4 percentage points. To reduce support by the same amount requires adding 14 percentage points on to the GDP growth rate. Being Muslim in a free country has no effect on the probability of supporting revolt compared to a non-religious person. However, being Muslim in a country that is not free increases it by 13 percentage points. Being Christian in a free country decreases the chance of supporting revolt by 4 percentage points, compared to a non-religious person, and in a not-free country by 1 percentage point.

Abstract:
Property rights, whose security is often threatened by civil conflict, are a necessary condition for the establishment of a market economy. Yet a fundamental and unresolved empirical question is whether the lack of political and civil freedoms is one of the root causes of greater insecurity. This paper takes a new approach to provide an answer by using micro-data on the revolutionary tastes of 106,170 people in 61 nations from 1981-97. Controlling for country fixed effects, year fixed effects and endogeneity, freedom has strong and robust negative effects on revolutionary support. A one standard deviation rise in freedom, equivalent to a shift from Argentina to the US, decreases the support for a revolt by 3 percentage points, or 38% of the standard deviation of the proportion of people who want one. Higher GDP growth rates can buy off part of the increase in revolutionary support when freedoms are constrained. There is also evidence that being religious reduces revolutionary tastes although the size of the effect varies with the extent of freedom and disappears entirely in non-free nations.

Revolt, Property Rights, Freedom, Growth, Religion

Abstract:
Property rights, whose security is often threatened by civil conflict, are a necessary condition for the establishment of a market economy. Yet a fundamental and unresolved empirical question is whether the lack of political and civil freedoms is one of the root causes of greater insecurity. This paper takes a new approach to provide an answer by using micro-data on the revolutionary tastes of 106,170 people in 61 nations from 1981-97. Controlling for country fixed effects, year fixed effects and endogeneity, freedom has strong and robust negative effects on revolutionary support. A one standard deviation rise in freedom, equivalent to a shift from Argentina to the US, decreases the support for a revolt by 3 percentage points, or 38% of the standard deviation of the proportion of people who want one. Higher GDP growth rates can buy off part of the increase in revolutionary support when freedoms are constrained. There is also evidence that being religious reduces revolutionary tastes although the size of the effect varies with the extent of freedom and disappears entirely in non-free nations.

Keywords: Revolt, Property Rights, Freedom, Growth, Religion

D74, H11, O1, O4, Z12

Abstract:
A fundamental question about the determinants of civil conflict is the relative importance of political freedoms versus economic development. This paper takes a new approach to provide an answer by using micro-data based on surveys of revolutionary tastes of 130,000 people living in 61 nations between 1981 and 1997. Controlling for personal characteristics, country and year fixed effects, more freedom and economic growth both reduce revolutionary support. Losing one level of freedom, equivalent to a shift from the US to Turkey, increases support for revolt by 4 percentage points. To reduce support by the same amount requires adding 14 percentage points onto the GDP growth rate. Being Muslim in a free country has no effect on the probability of supporting revolt compared to a non-religious person. However being Muslim in a country that is not free increases it by 13 percentage points. Being Christian in a free country decreases the chance of supporting revolt by 4 percentage points, compared to a non-religious person, and in a not-free country by 1 percentage point.

Revolution, Freedom, Development, Growth, Religion

Abstract:
Although property rights are the cornerstone of capitalist economics, throughout history existing claims have been frequently overturned and redefined by revolution. A fundamental question for economists is what makes revolutions more likely to occur. A large literature has found contradictory evidence for the effect of income and income inequality on revolt, possibly owing to omitted variable bias. The primary innovation of the paper is to tackle this problem by introducting a new panel data set derived from surveys of revolutionary support across one-quarter of a million randomly sampled individuals. This allows one to control for unobserved fixed effects. The regressions are based on a choice-theoretic model of revolt. After controlling for personal characteristics, country and year fixed effects, more people are found to favour revolt when inequality is high and their net incomes are low. A policy that decreases inequality equivalent to a shift from the US to Luxemburg is predicted to decrease support for revolt by 7.7 percentage points. A decrease of net income of $US 3,510 (in 1985 constant dollars) increases revolutionary support by the same amount. The results indicate that 'going for growth', or implementing policies that reduce inequality, can buy nations out of revolt.

Abstract:
Although property rights are the cornerstone of capitalist economies, throughout history existing claims have been frequently overturned and redefined by revolution. A fundamental question for economists is what makes revolutions more likely to occur. A large literature has found contradictory evidence for the effect of income and income inequality on revolt, possibly due to omitted variable bias. The primary innovation of the paper is to tackle this problem by introducing a new panel data set derived from surveys of revolutionary support across one-quarter of a million randomly sampled individuals. This allows one to control for unobserved fixed effects. The regressions are based on a choice-theoretic model of revolt. After controlling for personal characteristics, country and year fixed effects, more people are found to favor revolt when inequality is high and their net incomes are low. A policy that decreases inequality equivalent to a shift from the US to Luxembourg is predicted to decrease support for revolt by 7.7 percentage points. A decrease in net income of $US 3,510 (in 1985 constant dollars) increases revolutionary support by the same amount. The results indicate that 'going for growth', or implementing policies that reduce inequality, can buy nations out of revolt.

Property Rights, Revolts, Income Inequality

Abstract:
We use data on the subjective well-being of more than a quarter of a million people living in the OECD over the period 1975-92 to study the behavior of partisan social happiness functions. Controlling for personal characteristics of the respondents, year and country fixed effects and country specific time trends, we find that the data describe social happiness functions for left-wing and right-wing individuals where inflation and unemployment enter negatively. We use these functions to test the root assumption of partisan business cycle models where left-wing individuals care more about unemployment relative to inflation than right-wingers. Bootstrap confidence intervals suggest that up to 90 per cent of the time the evidence is consistent with this assumption. Interestingly, we find that it is misleading to assume that the poor (rich) behave similarly to the left (right). For example, the poor are hurt more by inflation than the rich, while the left are hurt less. Finally, we find that individuals declare themselves to be happier when the party they support is in power, even after controlling for economic variables. Our findings are hard to explain using median voter models but are to be expected in a partisan world.

Median Voter, Partisan Business Cycles, Subjective Well-Being

Abstract:
This paper develops a simple model to show how social insurance affects the desire to revolt against property rights. It then tests for the effect of social insurance on revolt by introducing a panel data set derived from surveys across 200,000 randomly sampled individuals from the 1970s to the 1990s. After controlling for the personal characteristics of respondents, country fixed effects, year dummies, as well as country-specific time trends, fewer people are found to support revolt when the generosity of either the elderly person's social security or unemployment benefits increases. A one standard deviation change in either variable explains approximately one standard deviation of the proportion of people supporting revolt, measured across the countries and years in the sample. The personal characteristic with the largest effect on reducing revolutionary support is being religious.

Abstract:
This paper develops a model to show how social insurance affects revolt against property rights and the consequences for the optimal design of the welfare state. It then tests for the effect of social insurance on revolt by introducing a panel data set derived from surveys across over 200,000 randomly sampled individuals from the 1970s to the 1990s. After controlling for personal characteristics of respondents, country fixed effects, year dummies, as well as country-specific time trends, less people are found to support revolt when the generosity of either the elderly person's social security or unemployment benefits increases. A one standard deviation change in either variable explains around one standard deviation of the proportion of people supporting revolt, measured across the countries and years in the sample. The personal characteristic that has the largest effect on reducing the support for revolt is being religious.

Social Insurance, Property Rights, Revolt

Abstract:
A fundamental question for economists is whether more income reduces the chance of revolt. To provide answers a large literature has used aggregate level data on actual conflict. This paper takes a different approach by using micro-data sets based on surveys of revolutionary support across one-quarter of a million people. This makes it possible to differentiate, for the first time, between the effects of a person's relative income position within a country and the level of average GDP per capita on the taste for revolt. Studying preferences rather than outcomes helps overcome several empirical problems. These include collective action problems that may lead to no large-scale conflict despite a public taste for revolt and endogeneity problems that exist when actual conflict affects income levels. Controlling for personal characteristics, country and year fixed effects, as well as country-specific time trends, a higher level of average GDP per capita and being relatively high in the income distribution within a country both reduce revolutionary tastes.

Preferences, Property Rights, Income, Revolts

Abstract:
We show that European-style hysteresis can arise in a normative model where labor market institutions are determined optimally. We focus on the government's decision to set unemployment benefits in response to an unemployment shock. The government balances insurance considerations with the tax burden of benefits and the possibility that they introduce adverse "incentive effects" whereby benefits increase the unemployment rate. It is found that when the shock occurs, benefits should be increased in those economies where the adverse incentive effects of benefits are largest. Adjustment costs of changing benefits can introduce hysteresis in benefit setting and unemployment. A good temporary shock can permanently reduce unemployment by making it optimal to have a cut in unemployment benefits. Desirable features of the model are that we obtain an asymmetry out of a symmetric environment and that the mechanism yielding hysteresis is both simple (requires the third derivative of the utility function to be non-negative) and self-correcting.

Optimal unemployment benefits, hysteresis, natural rate of unemployment

Abstract:
While much empirical research has been done on the labor market consequences of unemployment benefits, there is remarkably little evidence on the forces determining benefits. The paper presents a simple model where workers desire insurance against the possibility of unemployment and unemployment benefits increase the unemployment rate. We then conduct, what we believe, is one of the first empirical analyses of the determinants of the parameters of the unemployment benefit system. Using OECD data for 1971-1989, controlling for year and country fixed effects, and controlling for the political color of the government, we find evidence suggesting that benefits fall when the unemployment rate is high. This is consistent with the tax-effect described in Wright (1986) and Atkinson (1990). There is weaker evidence that benefits increase with positive changes in the unemployment rate, which may be proxying for the inflow rate and could be called an insurance effect.

endogenous unemployment benefits, unemployment, politics

Abstract:
While much empirical research has been done on the labor market consequences of unemployment benefits, there is remarkably little evidence on the forces determining benefits. The paper presents a simple model where workers desire insurance against the possibility of unemployment and unemployment benefits increase the unemployment rate. We then conduct, what we believe, is one of the first empirical analyses of the determinants of the parameters of the unemployment benefit system. Using OECD data for 1971-1989, controlling for year and country fixed effects, and controlling for the political colour of the government, we find evidence suggesting that the level of benefits falls when the unemployment rate is high. This is consistent with the tax-effect described in Wright [1986].

Abstract:
We study the problem of unemployment benefit provision when the family is also a provider of social insurance. As a benchmark, a simple model is presented where risk-sharing motives govern intra-family transfers and more generous unemployment benefits, provided by the State, crowd out family risk-sharing arrangements one-for-one. The model is then extended to capture the idea that the State has an advantage vis-a-vis the family in the provision of insurance because it can tax individuals, whereas the family must rely on self-enforcing agreements. In this case, the effect of State transfers on intra-family transfers is found to be more than one-for-one. Thus, somewhat perversely, both informal transfers and total insurance transfers to the unemployed fall as the State's generosity increases. This does not imply that the optimal size of the Welfare State is zero. Our results still hold when families are assumed to be better than the State at monitoring the job search activities of the unemployed.

Self-enforcing contracts, Optimal welfare generosity

Abstract:
Property rights, whose security is often threatened by terrorism and civil conflict, are a necessary condition for the establishment of a market economy. Yet a fundamental and unresolved empirical question is whether the lack of political and civil freedoms is one of the root causes of greater insecurity. This paper takes a new approach to provide an answer by using micro-data on 106,170 people in 61 nations from 1981 to 1997. Controlling for country effects, year effects and endogeneity, the level of freedom has strong and robust negative effects on revolutionary support. A one standard deviation rise in freedom, equivalent to a shift from Argentina to the US, decreases support by 3 percentage points, or 38% of the standard deviation of the proportion of people who want a revolution. Higher GDP growth rates can buy off part of the increase in support when freedoms are constrained. There is also evidence that being religious reduces revolutionary tastes although the size of the effect varies with the extent of freedom and disappears entirely in non-free nations.

Revolt, property rights, freedom, growth, religion

Abstract:
We show how the differences in US and European institutions can arise in a normative model. The paper focuses on the labor market and the government's decision to set unemployment benefits in response to an unemployment shock. The government balances insurance considerations with the tax burden of benefits and the possibility that they introduce adverse incentive effects whereby benefits increase unemployment. It is found that when an adverse shock occurs, benefits should be increased most when the adverse incentive effects of benefits are largest. Adjustment costs of changing benefits introduce hysteresis and can help explain why post-oil shock benefits remained high in Europe but not in the US. Desirable features of the model are that we obtain an asymmetry out of a symmetric environment and that the mechanism yielding hysteresis is both simple (requires the third derivative of the utility function to be non-negative) and self-correcting. Empirical evidence concerning the role of corporatism is discussed.

Optimal unemployment benefits, labor market institutions, hysteresis

Abstract:
Many years since their introduction, positive theories of inflation have rarely been tested. This paper documents a negative relationship between inflation and the welfare state (proxied by the parameters of the unemployment benefit program) that is to be expected in such theories. Because unemployment benefits make the monetary authority less concerned about the plight of the unemployed, building a welfare state has a similar effect to appointing a conservative central banker. The relationship holds in a panel of 21 OECD countries over the period 1961-92, a region where Romer (1993) finds no evidence of commitment problems. It also holds controlling for country and time fixed effects, country specific time trends, other co-variates and a lagged dependent variable. The effects are economically large: a one standard deviation decrease in benefits is predicted to add 2.7 percentage points to inflation, or 52 percent of the standard deviation in inflation. We also allow for unemployment benefits to be endogenously determined.

Inflation, unemployment benefits, endogenous welfare state

Abstract:
We test for whether, once basic needs are satisfied, there is happiness adaptation to further gains in income using three data sets. Individual German Panel Data from 1985-2000, and data on the well-being of over 600,000 people in a panel of European countries from 1975-2002, shows different patterns of adaptation to income across the rich and poor. We find evidence that for wealthy Germans, and for the rich half of European nations, higher levels of per capita income don't buy greater happiness. The reason appears to be adaptation. However even for the rich half of European nations such habituation may take over 5 years so the happiness gains that they experience, whilst not permanent, can still be relatively long-lasting. Finally we study a cross section of nations in 2005 from the World Gallup Poll and find that the past 45 years of economic growth (from 1960-2005) in the rich half of nations has not brought happiness gains above those that were already in place once the 1960s standard of living had been achieved. However in the poorest half of nations we cannot reject the null hypothesis that the happiness gains they have experienced from the past 45 years of growth have been the same as the gains that they experienced from growth prior to the 1960s.

Abstract:
We study habituation to income and to status using individual panel data on the happiness of 7,812 people living in Germany from 1984 to 2000. Specifically, we estimate a happiness equation defined over several lags of income and status and compare the long run effects. We can (cannot) reject the hypothesis of no adaptation to income (status) during the four years following an income (status) change. In the short-run (current year) a one standard deviation increase in status and 52% of one standard deviation in income are associated with similar increases in happiness. In the long-run (five year average) a one standard deviation increase in status has a similar effect to an increase of 285% of a standard deviation in income. We also present different estimates of habituation across sub-groups. For example, we find that those on the right (left) of the political spectrum adapt to status (income) but not to income (status).

Abstract:
We find anecdotal evidence suggesting that governments in poor countries have a more left wing rhetoric than those in OECD countries. Thus, it appears that capitalist rhetoric doesn't flow to poor countries. A possible explanation is that corruption, which is more widespread in poor countries, reduces more the electoral appeal of capitalism than that of socialism. The empirical pattern of beliefs within countries is consistent with this explanation: people who perceive corruption to be high in their country are also more likely to lean left ideologically (and to declare support for a more intrusive government in economic matters). Finally, we present a model explaining the corruption-left connection. It exploits the fact that an act of corruption is more revealing about the fairness type of a rich capitalist than of a poor bureaucrat. After observing corruption, voters who care about fairness react by increasing taxes and moving left. There is a negative ideological externality since the existence of corrupt entrepreneurs hurts good entrepreneurs by reducing the electoral appeal of capitalism.

Abstract:
We study unemployment benefit provision when the family also provides social insurance. In the benchmark case, more generous State transfers crowd out family risk-sharing one-for-one. An extension gives the State an advantage in enforcing transfers through taxes (whereas families rely on self-enforcement). More generous State transfers lead to more than one-for-one reductions in intra-family insurance, so that total transfers to the unemployed fall as the State's generosity increases. This does not imply that the optimal size of the Welfare State is zero. Our results still hold when families are assumed to be better than the State at monitoring job search activities of unemployed.

Abstract:
We use a new approach to study questions in political economy that relies on data on the subjective well-being of a large sample of people living in the OECD over the period 1975-1992. Controlling for the personal characteristics of the respondents, year and country fixed effects and country-specific time trends, we find that the data describe social happiness functions for left-wing and right-wing individuals where inflation and unemployment enter negatively. We use these functions to test the root assumption of partisan business cycle models. The evidence is consistent with the hypothesis that left-wing individuals care more about unemployment relative to inflation than right-wingers. Interestingly, we find that individuals declare themselves to be happier when the party they support is in power, even after controlling for macroeconomic variables. The effect of politics is large. Finally, we find that these partisan differences cannot be traced back to income differences. That is, it is misleading to assume - as it is done in the previous literature - that the poor (rich) behave similarly to the left (right). For example, inflation and unemployment do not have differential effects across rich and poor and the happiness levels of these two groups are unaffected by the identity of the party in power. Our findings are hard to explain using median voter models but are to be expected in a partisan world.

Abstract:
We show that data on satisfaction with life from over 600,000 Europeans are negatively correlated with the unemployment rate and the inflation rate. Our preferred interpretation is that this shows that emotions are affected by macroeconomic fluctuations. Contentment is, at a minimum, one of the important emotions that central banks should focus on. More ambitiously, contentment might be considered one of the components of utility. The results may help central banks understand the tradeoffs that the public is willing to accept in terms of unemployment for inflation, at least in terms of keeping the average level of one particular emotion (contentment) constant. An alternative use of these data is to study the particular channels through which macroeconomics affects emotions. Finally, work in economics on the design of monetary policy makes several assumptions (e.g., a representative agent, a summary measure of emotions akin to utility exists and that individuals only care about income and leisure) that can be used to interpret our results as weights in a social loss function.

Abstract:
We study the correlation between a belief concerning individualism and a measure of luck in the US during the period 1983-2004. The measure of beliefs is the answer to a question related to whether the poor should be helped by the government or if they should help themselves, while the measure of luck is the share of the oil industry in the state's economy multiplied by the price of oil. The correlation is negative, suggesting that more reliance on luck is correlated with less individualism. We provide three short models that help interpret this correlation. One implication of this finding is that societies that depend heavily on oil, and perhaps natural resources more generally, will experience a heavier demand for government intervention. We argue that if a government cares about the impact of its natural resource policies on the demand of government intervention more generally, it should take this effect into account.

Abstract:
A fundamental question about the determinants of civil conflict is the relative importance of political freedoms versus economic development. This paper takes a new approach to provide an answer by using micro-data based on surveys of revolutionary preferences of 130,000 people living in 61 nations between 1980 and 1997. Controlling for personal characteristics, country and year fixed effects, more freedom and economic growth both reduce revolutionary support. Losing one level of freedom, equivalent to a shift from the US to Turkey, increases support for revolt by 4 percentage points. To reduce support by the same amount requires adding 14 percentage points onto the GDP growth rate. Being Muslim in a free country has no effect on the probability of supporting revolt compared to a non-religious person. However being Muslim in a country that is not free increases it by 13 percentage points. Being Christian in a free country decreases the chance of supporting revolt by 4 percentage points, compared to a non-religious person, and in a not-free country by 1 percentage point.

Conflict, Freedom, Development, Growth, Religion