Reaping the Gains from Trade: Constraints and Opportunities of Agricultural Credit Markets

International trade liberalisation often implies increased potentials for export production. For investing in increasing capacity in agriculture, farmers need to have credit access. However, farmers in many countries are credit constrained, e.g. due to collateral reasons, which is the case in Central Europe and East Africa, among others. A model illustrates the additional producer gains from having access to credit; the gains are composed of a price effect, an investment effect, and a social capital externality. Improvement of agricultural credit can be achieved by relying on existing social structures, such as farmers' social capital. This approach tackles the collateral issue and can furthermore entail benefits external to the investment decision. The paper concludes that these externalities need to be addressed when designing optimal agricultural credit institutions.International Relations/Trade,

Formal Institutions and Subjective Well-Being: Revisiting the Cross-Country Evidence

A long tradition in economics explores the association between the quality of formal institutions and economic performance. The literature on the relationship between such institutions and happiness is, however, rather limited, and inconclusive. In this paper, we revisit the findings from recent cross-country studies on the institutions-happiness association. Our findings suggest that their conclusions are qualitatively rather insensitive to the specific measure of ‘happiness’ used, while the associations between formal institutions and subjective well-being differ among poor and rich countries. Separating different types of institutional quality, we find that in developing countries the effects of economic-judicial institutions on happiness dominate those of political institutions, while analyses restricted to middle- and high-income countries show strong support for an additional beneficial effect of political institutions. Our results bear important implications which we discuss in the concluding section of the paper. This paper is the 2010-update of Bjørnskov, Dreher, Fischer (2008), Formal Institutions and Subjective Well-Being: Revisiting the Cross-Country Evidence, Working Paper Series in Economics and Finance 699, Stockholm School of Economics.Happiness; life satisfaction; well-being; quality of life; institutions; democracy; rule of law; political constraints; policy implications

Inequality and happiness: When perceived social mobility and economic reality do not match

In this paper, we revisit the association between happiness and inequality. We argue that the interaction between the perceived and the actual fairness of the income generation process affects this association. Building on a simple model of individual labor-market participation under uncertainty, we predict that higher levels of perceived fairness cause higher levels of utility, and lower preferred levels of income redistribution. In societies with a low level of actual social mobility, income inequality is perceived more negatively with increased perceived fairness, due to the need for unexpected policy changes as a response to many unsuccessful investments of overly optimistic individuals. This effect becomes smaller as actual social mobility increases. Using data on happiness and a broad set of fairness measures from the World Values Survey, we find strong support for the negative (positive) association between fairness perceptions and the demand for more equal incomes (subjective well-being). We also find strong empirical support for the disappointment effect in countries with low social mobility. Consistent with our theoretical model, the results for high-mobility countries turn out to be ambiguous.Happiness; life satisfaction; subjective well-being; inequality; income distribution; redistribution; political ideology; justice; fairness; World Values Survey

On the relation between income inequality and happiness: Do fairness perceptions matter?

In this paper, we revisit the association between happiness and inequality. We argue that the perceived fairness of the income generation process affects this association. Building on a two-period model of individual life-time utility maximization, we predict that persons with higher perceived fairness will experience higher levels of life-time utility and are less in favor of income redistribution. In societies with a high level of actual social mobility, income inequality is perceived more positively with increased expected fairness. The opposite is expected for countries with low actual social mobility, due to an increasing relevance of a disappointment effect resulting from unsuccessful individual investments. Using the World Values Survey data and a broad set of fairness measures, we find strong support for the negative (positive) association between fairness perceptions and the demand for more equal incomes (subjective well-being). We also find strong empirical support for the disappointment effect in low social mobility countries. In contrast, the results for high-mobility countries turn out to be ambiguous.Happiness; life satisfaction; subjective well-being; inequality; income distribution; redistribution; political ideology; justice; fairness; World Values Survey

On the relation between income inequality and happiness: Do fairness perceptions matter?

In this paper, we revisit the association between happiness and inequality. We argue that the perceived fairness of the income generation process affects this association. Building on a two-period model of individual life-time utility maximization, we predict that persons with higher perceived fairness will experience higher levels of life-time utility and are less in favor of income redistribution. In societies with a high level of actual social mobility, income inequality is perceived more positively with increased expected fairness. The opposite is expected for countries with low actual social mobility, due to an increasing relevance of a disappointment effect resulting from unsuccessful individual investments. Using the World Values Survey data and a broad set of fairness measures, we find strong support for the negative (positive) association between fairness perceptions and the demand for more equal incomes (subjective well-being). We also find strong empirical support for the disappointment effect in low social mobility countries. In contrast, the results for high-mobility countries turn out to be ambiguous.Happiness; life satisfaction; subjective well-being; inequality; income distribution; redistribution; political ideology; justice; fairness; World Values Survey

Populism and inequality: Does reality match the populist rhetoric?

Populists since the Roman Republic have argued for redistribution from an elite to ordinary people and depicted themselves as the true representative of the ‘people’. However, very little research has explored whether populists actually affect the distribution of income or consumption when in power. The present paper therefore asks, whether populists admin- istrations actually achieve redistribution. After a short theoretical discussion, our empirical strategy combines new data on populism in Latin America and the Caribbean with infor- mation on income and consumption inequality since 1970. Estimates suggest that populist governments in the region generally have achieved no redistribution, leading us to con- clude that the redistributive aims of populists are mainly empty rhetoric

Formal Institutions and Subjective Well-Being: Revisiting the Cross-Country Evidence

A long tradition in economics explores the association between the quality of formal institutions and economic performance. The literature on the relationship between such institutions and happiness is, however, rather limited, and inconclusive. In this paper, we revisit the findings from recent cross-country studies on the institutions-happiness association. Our findings suggest that the conclusions reached by previous studies are qualitatively rather insensitive to the specific measure of ‘happiness’ used, while the associations between institutions and subjective well-being differ among poor and rich countries. Separating different types of institutional quality, we find that the effect of economic-judicial institutions on happiness seems to dominate those of political institutions when a sufficient number of developing countries are included in the sample, while analyses restricted to middle- and high-income countries show an additional strong support for a beneficial effect of political institutions. Our results bear important implications which we discuss in the concluding section of the paper. This paper is an update of Bjørnskov, Dreher, Fischer (2008), Formal Institutions and Subjective Well-Being: Revisiting the Cross-Country Evidence, Working Paper Series in Economics and Finance 699, Stockholm School of Economics

Inequality and happiness: When perceived social mobility and economic reality do not match

In this paper, we revisit the association between happiness and inequality. We argue that the interaction between the perceived and the actual fairness of the income generation process affects this association. Building on a simple model of individual labor-market participation under uncertainty, we predict that higher levels of perceived fairness cause higher levels of utility, and lower preferred levels of income redistribution. In societies with a low level of actual social mobility, income inequality is perceived more negatively with increased perceived fairness, due to the need for unexpected policy changes as a response to many unsuccessful investments of overly optimistic individuals. This effect becomes smaller as actual social mobility increases. Using data on happiness and a broad set of fairness measures from the World Values Survey, we find strong support for the negative (positive) association between fairness perceptions and the demand for more equal incomes (subjective well-being). We also find strong empirical support for the disappointment effect in countries with low social mobility. Consistent with our theoretical model, the results for high-mobility countries turn out to be ambiguous

Inequality and happiness: When perceived social mobility and economic reality do not match

In this paper, we revisit the association between happiness and inequality. We argue that the interaction between the perceived and the actual fairness of the income generation process affects this association. Building on a simple model of individual labor-market participation under uncertainty, we predict that higher levels of perceived fairness cause higher levels of utility, and lower preferred levels of income redistribution. In societies with a low level of actual social mobility, income inequality is perceived more negatively with increased perceived fairness, due to the need for unexpected policy changes as a response to many unsuccessful investments of overly optimistic individuals. This effect becomes smaller as actual social mobility increases. Using data on happiness and a broad set of fairness measures from the World Values Survey, we find strong support for the negative (positive) association between fairness perceptions and the demand for more equal incomes (subjective well-being). We also find strong empirical support for the disappointment effect in countries with low social mobility. Consistent with our theoretical model, the results for high-mobility countries turn out to be ambiguous

Inequality and happiness: When perceived social mobility and economic reality do not match.

We argue that perceived fairness of the income generation process affects the association between income inequality and subjective well-being, and that there are systematic differences in this regard between countries that are characterized by a high or, respectively, low level of actual fairness. Using a simple model of individual labor market participation under uncertainty, we predict that high levels of perceived fairness cause higher levels of individual welfare, and lower support for income redistribution. Income inequality is predicted to have a more favorable impact on subjective wellbeing for individuals with high fairness perceptions. This relationship is predicted to be stronger in societies that are characterized by low actual fairness. Using data on subjective well-being and a broad set of fairness measures from a pseudo micro-panel from the WVS over the 1990-2008 period, we find strong support for the negative (positive) association between fairness perceptions and the demand for more equal incomes (subjective well-being). We also find strong empirical support for the predicted differences in individual tolerance for income inequality, and the predicted influence of actual fairness