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(Un)Happiness in Transition

Sergei Guriev and Ekaterina Zhuravskaya

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Abstract: Despite strong growth performance in transition economies in the last decade, residents of transition countries report abnormally low levels of life satisfaction. Using data from the World Values Survey and other sources, we study various explanations of this phenomenon. First, we document that the disparity in life satisfaction between residents of transition and nontransition countries is much larger among the elderly. Second, we find that deterioration in public goods provision, an increase in macroeconomic volatility, and a mismatch of human capital of residents educated before transition (which disproportionately affects the aged population) explain a great deal of the difference in life satisfaction between transition countries and other countries with similar income and other macroeconomic conditions. The rest of the gap is explained by the difference in the quality of the samples. As in other countries, life satisfaction in transition countries is strongly related to income; but, due to a higher nonresponse of high-income individuals in transition countries, the survey-data estimates of the recent increase in life satisfaction, driven by 10-year sustained economic growth in transition region, are biased downwards. The evidence suggests that if the region keeps growing, life satisfaction in transition countries will catch up with the "normal" level in the near future.

Keywords: General Welfare; Socialist Systems and Transitional Economies: National Income; Product; and Expenditure; Money; Inflation; Socialist Institutions and Their Transitions: Consumer Economics; Health; Education and Training; Welfare; and Poverty (search for similar items in EconPapers)
Date: 2009-06
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Published in Journal of Economic Perspectives, 2009, 2 (23), pp.143 - 168. ⟨10.1257/jep.23.2.143⟩

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DOI: 10.1257/jep.23.2.143

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