The Effects of Income Transparency on Well-Being: Evidence from a Natural Experiment
University of California, Los Angeles (UCLA)
February 10, 2016
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.
Number of Pages in PDF File: 48
Keywords: self-image, social-image, happiness, life satisfaction, income comparisons, relative income, disclosure policy
JEL Classification: D03, D60, D31, D80, I31, K34, Z10
Date posted: September 9, 2015 ; Last revised: February 20, 2016