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HAPPINESS UNFOLDED Eliciting preferences through subjective questions

By B. M. S. Van Praag, P. Frijters and A. Ferrer-i-carbonell


† The authors would like to thank Rob Alessie for useful comments. The usual disclaimers apply. We would also like to thank the GSOEP group and their director Prof. G. Wagner for making the data Happiness has recently been studied by several economists, e.g., Di Tella et al. (2000), Frey and Stutzer (2000). This paper fits into this literature but takes into account that there are different aspects to life, e.g., health, financial situation, job. We call these aspects domains and each domain is evaluated by determining domain satisfaction. In this paper we ‘unfold ’ the general concept of happiness, whereby considerably composite of domain satisfactions. We postulate a simultaneous equation model where individual happiness is explained 'objective ' variables, and by individual subjective domain satisfactions with respect to job, finance, health, leisure, housing, and environment. We distinguish between long- and short- term effects. It is possible to explain domain satisfactions and happiness to a large extent using objectively measurable variables such as income. The model is estimated using ordered probit with individual random effects and fix time effects. We apply the model to find the income loss equivalent to loosing employment for a worker. Key words: happiness, satisfaction measurement, qualitative regressors, health satisfaction, job satisfaction.

Year: 2001
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