The Macroeconomics of Happiness

Rafael Di Tella, Robert MacCulloch and Andrew Oswald

The Review of Economics and Statistics, 2003, vol. 85, issue 4, 809-827

Abstract: We show that macroeconomic movements have strong effects on the happiness of nations. First, we find that there are clear microeconomic patterns in the psychological well-being levels of a quarter of a million randomly sampled Europeans and Americans from the 1970s to the 1990s. Happiness equations are monotonically increasing in income, and have similar structure in different countries. Second, movements in reported well-being are correlated with changes in macroeconomic variables such as gross domestic product. This holds true after controlling for the personal characteristics of respondents, country fixed effects, year dummies, and country-specific time trends. Third, the paper establishes that recessions create psychic losses that extend beyond the fall in GDP and rise in the number of people unemployed. These losses are large. Fourth, the welfare state appears to be a compensating force: higher unemployment benefits are associated with higher national well-being. © 2003 President and Fellows of Harvard College and the Massachusetts Institute of Technology.

JEL-codes: I31 (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (759)

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Related works:
Working Paper: The Macroeconomics of Happiness (2001)
Working Paper: The Macroeconomics of Happiness (1997)
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