Accounting for Unobserved Country Heterogeneity in Happiness Research: Country Fixed Effects Versus Region Fixed Effects

Fischer, Justina  A. V.

doi:10.2139/ssrn.1618212

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Accounting for Unobserved Country Heterogeneity in Happiness Research: Country Fixed Effects Versus Region Fixed Effects

CEIS Working Paper No. 164

31 Pages Posted: 1 Jun 2010

See all articles by Justina A. V. Fischer

Justina A. V. Fischer

Organization for Economic Co-Operation and Development (OECD); Stockholm School of Economics; University of Hohenheim

Date Written: April 31, 2010

Abstract

Many empirical studies are ambiguous about whether good formal institutions are conducive to subjective well-being or not. Possibly, this ambiguity is caused by cross-section models that do not account for unobserved cultural and institutional effects. Using the World Value Survey 1980-2005, this paper supports a positive relation in a country panel framework that accounts for unobserved, time-invariant country heterogeneity. This study also shows that using supranational region dummies (by geography or language) in a country-random effects model appears to be a sufficient substitution for omitted country fixed effects.

Keywords: Happiness, Life Satisfaction, Well-Being, Quality of Life, Institutions, Democracy, Rule of Law, Political Constraints, Policy Implications, Panel Econometrics

JEL Classification: I31, H10, H40, C33

Suggested Citation: Suggested Citation

Fischer, Justina A.V., Accounting for Unobserved Country Heterogeneity in Happiness Research: Country Fixed Effects Versus Region Fixed Effects (April 31, 2010). CEIS Working Paper No. 164, Available at SSRN: https://ssrn.com/abstract=1618212 or http://dx.doi.org/10.2139/ssrn.1618212