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The Effects of Income Transparency on Well-Being: Evidence from a Natural Experiment

Ricardo Perez-Truglia ()

No 25622, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In 2001, Norwegian tax records became easily accessible online, allowing everyone in the country to observe the incomes of everyone else. According to the income comparisons model, this change in transparency can widen the gap in well-being between richer and poorer individuals. We test this hypothesis using survey data from 1985–2013. Using multiple identification strategies, we show that the higher transparency increased the gap in happiness between richer and poorer individuals by 29%, and it increased the life satisfaction gap by 21%. We provide suggestive evidence that some, although probably not all, of this effect relates to changes in self-perceptions of relative income. We provide back-of-the-envelope estimates of the importance of income comparisons, and discuss implications for the ongoing debate on transparency policies.

JEL-codes: D03 D31 D60 D83 I31 Z10 (search for similar items in EconPapers)
Date: 2019-02
New Economics Papers: this item is included in nep-eur, nep-hap and nep-ltv
Note: LS PE POL
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Published as Ricardo Perez-Truglia, 2020. "The Effects of Income Transparency on Well-Being: Evidence from a Natural Experiment," American Economic Review, vol 110(4), pages 1019-1054.

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