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

70 Pages Posted: 4 Mar 2019

See all articles by Ricardo Perez-Truglia

Ricardo Perez-Truglia

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

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Date Written: February 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.

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Suggested Citation

Perez-Truglia, Ricardo, The Effects of Income Transparency on Well-Being: Evidence from a Natural Experiment (February 2019). NBER Working Paper No. w25622, Available at SSRN: https://ssrn.com/abstract=3346268

Ricardo Perez-Truglia (Contact Author)

University of California, Berkeley ( email )

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Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER) ( email )

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