Neighbors' income, public goods, and well‐being

How does neighbors' income affect individual well‐being? Our analysis is based on rich U.S. local data from the Behavioral Risk Factor Surveillance System, which contains information on where respondents live and their self‐reported well‐being. We find that the effect of neighbors' income on individuals' self‐reported well‐being varies with the size of the neighborhood included. In smaller areas such as ZIP codes, we find a positive relationship between median income and individuals' life satisfaction, whereas it is the opposite at the county, MSA, and state levels. We provide evidence that local public goods and local area characteristics such as unemployment, criminality, and poverty rates drive the association between satisfaction and neighbors' income at the ZIP code level. The neighbors' income effects are mainly concentrated among poorer individuals and are as large as one quarter of the effect of own income on self‐reported well‐being

Economic Backwardness and Social Tension

We propose that relative economic backwardness contributes to the build-up of social tension and non-violent and violent conflict. We test our hypothesis using data on organized mass movements and armed civil conflict. The findings show that greater economic backwardness is consistently linked to a higher probability of onset of violent and especially non-violent forms of civil unrest. We provide evidence that the relationship is causal in instrumental variables estimations using new instruments, including mailing speeds and telegram charges around 1900. The magnitude of the effect of backwardness on social tension increases in the two-stage least-squares estimations

Physiconomics for the Identification of Relativistic Satisfaction

Abstract Recent developments in identifying economic and social phenomena within the theory and laws of physics do not provide a sufficient basis of information for economists. In this article, an interdisciplinary analysis in microeconomics, is proposed to overcome this limit by establishing a new economic theory in the way of better analyzing economic problems from the methodological perspectives of physics. This new theoretical approach is tested on a model using individual time use values that identifies how life satisfaction may be defined through economic utility so as to better investigate the income-happiness paradox as pointed out by Easterlin. The theoretical analysis point out that an increase in happiness would depend on the ability to replace subsidiaries with conspicuous consumption so long as they have common characteristics that satisfy the same needs. This consumption pattern implies that consumers would draw more satisfaction from less usage of conspicuous goods than from higher usage of subsidiaries, under given budget and time constraints

Time and Money: Substitutes in Real Terms and Complements in Satisfactions

Time and money are basic commodities in the utility function and are substitutes in real terms. To a certain extent, having time and money is a matter of either/or, depending on individual preferences and budget constraints. However, satisfaction with time and satisfaction with money are typically complements, i.e., individuals tend to be equally satisfied with both domains. In this paper, we provide an explanation for this apparent paradox through the analysis of the simultaneous determination of economic satisfaction and leisure satisfaction. We test some hypotheses, including the hypothesis that leisure satisfaction depends on both the quantity and quality of leisure-where quality is proxied by good intensiveness and social intensiveness. Our results show that both the quantity and the quality of leisure are important determinants of leisure satisfaction, and, since having money contributes to the quality of leisure, this explains the empirical findings of the satisfactions being complementary at the same time as the domains are substitutes. Interestingly, gender matters. Intra-household effects and especially individual characteristics are more pronounced for women than for men for both domain satisfactions. Additionally, good intensiveness is more important for men (e.g., housing conditions), whereas social intensiveness is more important for women (e.g., the presence of children and participation in leisure-time activities)

The Origin of Behavior

We propose a single evolutionary explanation for the origin of several behaviors that have been observed in organisms ranging from ants to human subjects, including risk-sensitive foraging, risk aversion, loss aversion, probability matching, randomization, and diversification. Given an initial population of individuals, each assigned a purely arbitrary behavior with respect to a binary choice problem, and assuming that offspring behave identically to their parents, only those behaviors linked to reproductive success will survive, and less reproductively successful behaviors will disappear at exponential rates. When the uncertainty in reproductive success is systematic, natural selection yields behaviors that may be individually sub-optimal but are optimal from the population perspective; when reproductive uncertainty is idiosyncratic, the individual and population perspectives coincide. This framework generates a surprisingly rich set of behaviors, and the simplicity and generality of our model suggest that these derived behaviors are primitive and nearly universal within and across species

The effects of economic deprivation on psychological well-being among the working population of Switzerland

BACKGROUND: The association between poverty and mental health has been widely investigated. There is, however, limited evidence of mental health implications of working poverty, despite its representing a rapidly expanding segment of impoverished populations in many developed nations. In this study, we examined whether working poverty in Switzerland, a country with substantial recent growth among the working poor, was correlated with two dependent variables of interest: psychological health and unmet mental health need. METHODS: This cross-sectional study used data drawn from the first 3 waves (1999–2001) of the Swiss Household Panel, a nationally representative sample of the permanent resident population of Switzerland. The study sample comprised 5453 subjects aged 20–59 years. We used Generalized Estimating Equation models to investigate the association between working poverty and psychological well-being; we applied logistic regression models to analyze the link between working poverty and unmet mental health need. Working poverty was represented by dummy variables indicating financial deficiency, restricted standard of living, or both conditions. RESULTS: After controlling other factors, restricted standard of living was significantly (p < .001) negatively correlated with psychological well-being; it was also associated with approximately 50% increased risk of unmet mental health need (OR = 1.55; 95% CI 1.17 – 2.06). CONCLUSION: The findings of this study contribute to our understanding of the potential psychological impact of material deprivation on working Swiss citizens. Such knowledge may aid in the design of community intervention programs to help reduce the individual and societal burdens of poverty in Switzerland

Interdependent Utilities: How Social Ranking Affects Choice Behavior

Organization in hierarchical dominance structures is prevalent in animal societies, so a strong preference for higher positions in social ranking is likely to be an important motivation of human social and economic behavior. This preference is also likely to influence the way in which we evaluate our outcome and the outcome of others, and finally the way we choose. In our experiment participants choose among lotteries with different levels of risk, and can observe the choice that others have made. Results show that the relative weight of gains and losses is the opposite in the private and social domain. For private outcomes, experience and anticipation of losses loom larger than gains, whereas in the social domain, gains loom larger than losses, as indexed by subjective emotional evaluations and physiological responses. We propose a theoretical model (interdependent utilities), predicting the implication of this effect for choice behavior. The relatively larger weight assigned to social gains strongly affects choices, inducing complementary behavior: faced with a weaker competitor, participants adopt a more risky and dominant behavior

A Nonbehavioral Theory of Saving

We present a model where the saving rate of the household sector, especially households at the bottom of the income distribution, becomes the endogenous variable that adjusts in order for full employment to be maintained over time. An increase in income inequality and the current account deficit and a consolidation of the government budget lead to a decrease in the saving rate of the household sector. Such a process is unsustainable because it leads to an increase in the household debt-to-income ratio, and maintaining it depends on some sort of asset bubble. This framework allows us to better understand the factors that led to the Great Recession and the dilemma of a repeat of this kind of unsustainable process or secular stagnation. Sustainable growth requires a decrease in income inequality, an improvement in the external position, and a relaxation of the fiscal stance of the government

Asking about Changes in Happiness in a Daily Web Survey

This paper investigates whether the level of happiness and integrated process of changes in happiness are the same. Using the daily data of two waves of four and six months each, we found that the level of happiness is stationary, whereas the integrated process of changes is non-stationary with a rising trend, implying that they are different series. An examination of the causes of the difference indicated that although adaptation completely influences the level of happiness, it only partially influences the change in happiness. This may be because the latter is based on a comparison between today and yesterday