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Testing Theories of Happiness

Zurich IEER Working Paper No. 147

37 Pages Posted: 25 May 2003  

Bruno S. Frey

CREMA; University of Basel

Alois Stutzer

University of Basel - Faculty of Business and Economics; IZA Institute of Labor Economics

Date Written: April 2003

Abstract

Happiness research in economics takes reported subjective well-being as a proxy measure for utility and has already provided many interesting insights about human well-being and its determinants. We argue that future research on happiness in economics has a lot of potential, but that it needs to be guided more by theory. We propose two ways to test theories of happiness, and illustrate them with two applications. First, reported subjective well-being can contribute towards a new understanding of utility in economics. Here, we study the introduction of income aspirations in individuals' utility functions in order to improve our understanding of how income affects individual well-being. Second, happiness data offers a new possibility of discriminating between different models of behavior. This is studied for theories of marriage, which crucially depend on auxiliary assumptions as to what contributes to well-being in marriage. Both applications are empirically tested with panel data for Germany.

Keywords: aspiration level, marriage, relative income, subjective well-being, utility

JEL Classification: D13, D60, D63, I31, J12

Suggested Citation

Frey, Bruno S. and Stutzer, Alois, Testing Theories of Happiness (April 2003). Zurich IEER Working Paper No. 147. Available at SSRN: https://ssrn.com/abstract=405541 or http://dx.doi.org/10.2139/ssrn.405541

Bruno S. Frey (Contact Author)

CREMA ( email )

Südstrasse 11
Zurich, CH 8008
Switzerland
+41 44 380 00 78 (Phone)

University of Basel ( email )

Peter Merian-Weg 6
Basel, 4002
Switzerland

Alois Stutzer

University of Basel - Faculty of Business and Economics ( email )

Peter Merian-Weg 6
4002 Basel
Switzerland
0041 61 267 3361 (Phone)
0041 61 267 3340 (Fax)

HOME PAGE: http://www.wwz.unibas.ch/stutzer/

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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