Does the Risk of Poverty Reduce Happiness?

Stefano A. Caria () and Paolo Falco
Additional contact information
Stefano A. Caria: University of Oxford

No 363, Development Working Papers from Centro Studi Luca d'Agliano, University of Milano

Keywords: poverty; vulnerability; risk; subjective well-being; happiness; loss-aversion (search for similar items in EconPapers)
JEL-codes: D60 D81 I31 I32 O12 (search for similar items in EconPapers)
Pages: 45
Date: 2014-04-07, Revised 2014-04-07
New Economics Papers: this item is included in nep-hap, nep-hpe and nep-ltv
Note: We investigate the unexplored link between the risk of poverty and happiness in the context of a developing country. Using unique longitudinal data, we estimate workers’ vulnerability to income-poverty and find a strong negative relationship between vulnerability and happiness, over and above a positive income effect. The result is robust and cannot be reduced to the effect of two-sided uncertainty. A matched behavioural experiment shows that respondents are significantly loss-averse. We conclude that downside risk is an important determinant of happiness and of economic decisions under uncertainty. Policies that mitigate downward risk may thus have direct impacts on both well-being and efficiency.
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Related works:
Journal Article: Does the Risk of Poverty Reduce Happiness? (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:csl:devewp:363

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