Macroeconomics and Life Satisfaction: Revisiting the 'Misery Index'

Abstract:     
Using data from surveys of life satisfaction, evidence has been presented that European citizens' subjective well-being is inversely related to inflation and unemployment. Motivated by the Barro Misery Index, this paper reconsiders the relationship between macroeconomics and subjective well-being by including the growth rate and the long-term interest rate as additional variables in life satisfaction regressions. The paper finds that people care about growth and employment on the one hand and stability on the other, where stability may alternatively be captured by the inflation rate or the long-term interest rate. Stability, measured in whichever of these ways, does not seem to be less important to European citizens than growth and employment.

Keywords: misery index, social welfare function, inflation, unemployment, subjective wellbeing, life satisfaction

JEL Classification: E61, I31

Accepted Paper Series