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

69 Pages Posted: 9 Sep 2015 Last revised: 4 Sep 2019

See all articles by Ricardo Perez-Truglia

Ricardo Perez-Truglia

University of California, Berkeley; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: February 23, 2019

Abstract

In 2001, Norwegian tax records became easily accessible online, allowing everyone in the country to observe the incomes of everyone else. According to the income comparisons model, this change in transparency can widen the gap in well-being between richer and poorer individuals. We test this hypothesis using survey data from 1985–2013. Using multiple identification strategies, we show that the higher transparency increased the gap in happiness between richer and poorer individuals by 29%, and it increased the life satisfaction gap by 21%. We provide suggestive evidence that some, although probably not all, of this effect relates to changes in self-perceptions of relative income. We provide back-of-the-envelope estimates of the importance of income comparisons, and discuss implications for the ongoing debate on transparency policies.

Keywords: transparency, well-being, happiness, income comparisons, relative income

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 23, 2019). 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, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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