Happiness economics

There is enough evidence to be confident that individuals are able and willing to provide a meaningful answer when asked to value on a finite scale their satisfaction with their own lives, a question that psychologists have long and often posed to respondents of large questionnaires. Without taking its limitations and criticisms too lightly, some economists have been using thismeasure of self-reported satisfaction as a proxy for utility so as to contribute to a better understanding of individuals' tastes and hopefully behavior. By means of satisfaction questions we can elicit information on individual likes and dislikes over a large set of relevant issues, such as income, working status and job amenities, the risk of becoming unemployed, inflation, and health status. This information can be used to evaluate existing ideas from a new perspective, understand individual behavior, evaluate and design public policies, study poverty and inequality, and develop a preference based valuation method. In this article I first critically assess the pros and cons of using satisfaction variables, and then discuss its main applications

Financial Satisfaction and (in)formal Sector in a Transition Country

This paper examines the relationship between working in the formal or informal sector and self-reported individual financial satisfaction in a country in transition. It does so by allowing for individual heterogeneity in terms of perceived financial insecurity and tax morale. The empirical analysis uses a dataset for Albania, a country in transition. The method applied is the ‘self-administered questionnaire’, which combines personal contacts with written questionnaire. The results indicate that, for most individuals, working in the informal sector has negative effects on their self reported financial satisfaction. For some individuals, however, this effect is positive. The characteristic defining these two groups of individuals is their attitude towards the perceived financial insecurity related to not paying taxes. These findings have important implications, in particular for transition countries with large informal sectors. Given the involuntary participation in the informal sector in these countries, the majority of individuals working in this sector will remain financially dissatisfied as long as they have no other social safety net

The use of happiness research for public policy

Research on happiness tends to follow a "benevolent dictator" approach where politicians pursue people's happiness. This paper takes an antithetic approach based on the insights of public choice theory. First, we inquire how the results of happiness research may be used to improve the choice of institutions. Second, we show that the policy approach matters for the choice of research questions and the kind of knowledge happiness research aims to provide. Third, we emphasize that there is no shortcut to an optimal policy maximizing some happiness indicator or social welfare function since governments have an incentive to manipulate this indicator

A Nonparametric Partially Identified Estimator for Equivalence Scales

Methods for estimating equivalence scales usually rely on rather strong identifying assumptions. This paper considers a partially identified estimator for equivalence scales derived from the potential outcomes framework and using nonparametric methods for estimation, which requires only mild assumptions. Instead of point estimates, the method yields only lower and upper bounds of equivalence scales. Results of an analysis using German expenditure data show that the range implied by these bounds is rather wide, but can be reduced using additional covariates.Methoden zur Ermittlung von Äquivalenzskalen gehen in aller Regel von relativ starken Annahmen aus. In der vorliegenden Arbeit wird ein partiell identifizierter Schätzer für Äquivalenzskalen vorgestellt, der auf dem Potential Outcomes Ansatz basiert und nur vergleichsweise schwache Annahmen benötigt. Anstelle eines Punktschätzers liefert das Verfahren nur Unter- und Obergrenzen für Äquivalenzskalen. Eine Anwendung auf Daten der Einkommens- und Verbrauchsstichprobe zeigt, dass die durch Unter- und Obergrenze gegebenen Intervalle oftmals sehr breit sind. Die Breite der Intervalle kann reduziert werden, wenn zusätzliche Variablen bei der Schätzung herangezogen werden

Personal and Societal Health Quality Lost to Tuberculosis

BACKGROUND: In developed countries, tuberculosis is considered a disease with little loss of Quality-Adjusted Life Years (QALYs). Tuberculosis treatment is predominantly ambulatory and death from tuberculosis is rare. Research has shown that there are chronic pulmonary sequelae in a majority of patients who have completed treatment for pulmonary tuberculosis (PTB). This and other health effects of tuberculosis have not been considered in QALY calculations. Consequently both the burden of tuberculosis on the individual and the value of tuberculosis prevention to society are underestimated. We estimated QALYs lost to pulmonary TB patients from all known sources, and estimated health loss to prevalent TB disease. METHODOLOGY/PRINCIPAL FINDINGS: We calculated values for health during illness and treatment, pulmonary impairment after tuberculosis (PIAT), death rates, years-of-life-lost to death, and normal population health. We then compared the lifetime expected QALYs for a cohort of tuberculosis patients with that expected for comparison populations with latent tuberculosis infection and without tuberculosis infection. Persons with culture-confirmed tuberculosis accrued fewer lifetime QALYs than those without tuberculosis. Acute tuberculosis morbidity cost 0.046 QALYs (4% of total) per individual. Chronic morbidity accounted for an average of 0.96 QALYs (78% of total). Mortality accounted for 0.22 QALYs lost (18% of total). The net benefit to society of averting one case of PTB was about 1.4 QALYs. CONCLUSIONS/SIGNIFICANCE: Tuberculosis, a preventable disease, results in QALYs lost owing to illness, impairment, and death. The majority of QALYs lost from tuberculosis resulted from impairment after microbiologic cure. Successful TB prevention efforts yield more health quality than previously thought and should be given high priority by health policy makers. (Refer to Abstracto S1 for Spanish language abstract)

Happiness through leisure

Happiness is important to individuals. If one were to make a judgment based on the vast amount of self-help books available in any bookstore, the conclusion would have to be that happiness is a very important aspect of people’s lives. Whether such books actually provide any solutions to increase happiness is doubtful (Bergsma, 2008). Nevertheless, many are clearly interested in happiness

Are Relative-Income Effects Constant Across the Well-Being Distribution?

This paper challenges the common assumption made by economists to date that income comparisons are similarly important in different segments of the subjective well-being (SWB) distribution. The results, based on the 2000-2007 waves of the German SOEP and on a Generalized Ordered Probit for panel data, show that relative income, as measured either by the mean income of the reference group or the individual ordinal ranking within the group, exerts a differential effect across SWB levels. Such divergence is assessed by means of the tradeoff ratio between household income and the relative income variables. The results show that a low rank and falling below the average income in one's group are significant determinants of low SWB but largely irrelevant when accounting for high SWB. The fact that conditionally unhappy individuals are more sensitive to comparisons, particularly if they are unfavorable, is consistent with earlier laboratory studies in the field of psychology