Testing Theories of Happiness

Bruno Frey and Alois Stutzer

No 147, IEW - Working Papers from Institute for Empirical Research in Economics - University of Zurich

Abstract: Happiness research in economics takes reported subjective well-being as a proxy measure for utility and has already provided many interesting insights about human well-being and its determinants. We argue that future research on happiness in economics has a lot of potential, but that it needs to be guided more by theory. We propose two ways to test theories of happiness, and illustrate them with two applications. First, reported subjective well-being can contribute towards a new understanding of utility in economics. Here, we study the introduction of income aspirations in individuals� utility functions in order to improve our understanding of how income affects individual well-being. Second, happiness data offers a new possibility of discriminating between different models of behavior. This is studied for theories of marriage, which crucially depend on auxiliary assumptions as to what contributes to well-being in marriage. Both applications are empirically tested with panel data for Germany.

Keywords: aspiration level; marriage; relative income; subjective well-being; utility (search for similar items in EconPapers)
JEL-codes: D13 D60 D63 I31 J12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe, nep-lam and nep-ltv
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Citations: View citations in EconPapers (51)

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