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Explaining the Income-Distribution Puzzle in Happiness Research: Theory and Evidence

Barbara Dluhosch (), Daniel Horgos and Klaus Zimmermann
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Barbara Dluhosch: Helmut Schmidt University, Hamburg, Postal: Helmut Schmidt University Hamburg – University FAF Hamburg, Department of Economics, Holstenhofweg 85, 22043 Hamburg, Germany

No 117/2012, Working Paper from Helmut Schmidt University, Hamburg

Abstract: The nexus between income and happiness is very much disputed. Many cross-sectional studies see a positive relationship, most longitudinal studies don’t. Starting from the fact that the theoretical basis in happiness research has been comparatively weak, we develop a model that identifies distributional consequences of unemployment with their importance conditional per-capita income as at the heart of the matter. Our theory is backed by empirical evidence on OECD data: in low-income countries, well-being significantly depends on income, in highincome countries on the unemployment-related Gini. Insofar, our findings establish the income-satiation hypothesis of longitudinal studies also in cross-sectional perspective.

Keywords: Happiness; Welfare Economics; Income Distribution; Unemployment (search for similar items in EconPapers)
JEL-codes: D60 I31 J60 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2012-06-20
New Economics Papers: this item is included in nep-ltv
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