Di Tella, Rafael, MacCulloch, Robert J. and Oswald, Andrew J. . (2006) The macroeconomics of happiness. Review of Economics and Statistics, Vol.85 (No.4). pp. 809-827. ISSN 0034-6535

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Abstract

We show that macroeconomic movements have strong effects on the happiness of nations. First, we find that there are clear microeconomic patterns in the psychological well-being levels of a quarter of a million randomly sampled Europeans and Americans from the 1970's to the 1990's. Happiness equations are monotonically increasing in income, and have a similar structure in different countries. Second, movements in reported well-being are correlated with changes in macroeconomic variables such as Gross Domestic Product. This holds true after controlling for the personal characteristics of respondents, country fixed-effects, year dummies, and country-specific time trends. Third, the paper establishes that recessions create psychic losses that extend beyond the fall in GDP and rise in the number of people unemployed. These losses are large. Fourth, the welfare state appears to be a compensating force: higher unemployment benefits are associated with higher national well-being.

Item Type:	Journal Article
Subjects:	H Social Sciences > HB Economic Theory
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Happiness, Macroeconomics
Journal or Publication Title:	Review of Economics and Statistics
Publisher:	MIT Press
ISSN:	0034-6535
Date:	13 March 2006
Volume:	Vol.85
Number:	No.4
Page Range:	pp. 809-827
Identification Number:	10.1162/003465303772815745
Status:	Peer Reviewed
Access rights to Published version:	Open Access
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URI:	http://wrap.warwick.ac.uk/id/eprint/314

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