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The Effects of Income Transparency on Well-Being: Evidence from a Natural Experiment

48 Pages Posted: 9 Sep 2015 Last revised: 20 Feb 2016

Ricardo Perez-Truglia

University of California, Los Angeles (UCLA)

Date Written: February 10, 2016

Abstract

In 2001, Norwegian tax records became easily accessible online, allowing individuals to observe the incomes of others. Because of self-image and social-image concerns, higher income transparency can increase the differences in well-being between rich and poor. We test this hypothesis using survey data from 1985-2013. We identify the causal effect of income transparency on subjective well-being by using differences-in-differences, triple-differences, and event-study analyses. We find that higher income transparency increased the happiness gap between rich and poor by 29% and the life satisfaction gap by 21%. Additionally, higher income transparency corrected misperceptions about the income distribution and changed preferences for redistribution. Last, we use the estimates for back-of-the-envelope calculations of the value of self-image and social-image.

Keywords: self-image, social-image, happiness, life satisfaction, income comparisons, relative income, disclosure policy

JEL Classification: D03, D60, D31, D80, I31, K34, Z10

Suggested Citation

Perez-Truglia, Ricardo, The Effects of Income Transparency on Well-Being: Evidence from a Natural Experiment (February 10, 2016). Available at SSRN: https://ssrn.com/abstract=2657808 or http://dx.doi.org/10.2139/ssrn.2657808

Ricardo Perez-Truglia (Contact Author)

University of California, Los Angeles (UCLA) ( email )

405 Hilgard Avenue
Box 951361
Los Angeles, CA 90095
United States

HOME PAGE: http://www.anderson.ucla.edu/faculty/global-economics-and-management/perez-truglia

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