The Macroeconomics of Happiness
University of Bonn ZEI Working Paper No. B3
41 Pages Posted: 4 Oct 2001
Date Written: September 17, 2001
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.
Keywords: Well-being, Happiness, Macroeconomics, Costs of Business Cycles, Unemployment Insurance
JEL Classification: E6
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
By Ed Diener
-
What Can Economists Learn from Happiness Research?
By Bruno S. Frey and Alois Stutzer
-
Culture and Subjective Well-Being
By William Tov and Ed Diener
-
A Note on Unhappiness and Unemployment Duration
By Andrew Clark
-
Happiness, Economy and Institutions
By Bruno S. Frey and Alois Stutzer
-
Subjective Well-Being: Three Decades of Progress
By Ed Diener, Eunkook Suh, ...
-
Inequality and Happiness: Are Europeans and Americans Different?
By Alberto F. Alesina, Rafael Di Tella, ...