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  • November 2003
  • Article
  • Review of Economics and Statistics

The Macroeconomics of Happiness

By: Rafael Di Tella, Robert MacCulloch and Andrew J. Oswald
  • Format:Print
  • | Pages:17
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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 natinal well-being.

Keywords

Macroeconomics; Happiness

Citation

Di Tella, Rafael, Robert MacCulloch, and Andrew J. Oswald. "The Macroeconomics of Happiness." Review of Economics and Statistics 85, no. 4 (November 2003): 793–809.
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About The Author

Rafael M. Di Tella

Business, Government and the International Economy
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More from the Authors
  • Brazil’s Messias? The Lava Jato Corruption Scandal, the Recession, and the Rise of Bolsonaro By: Rafael Di Tella and Jose Liberti
  • Liz Truss and the Thatcher Legacy: Markets and Fiscal Dominance in the United Kingdom By: Rafael Di Tella, Pablo Ottonello and David Allen
  • The Political Economy of a 'Miracle Cure': The Case of Nebulized Ibuprofen and Its Diffusion in Argentina By: Sebastian Calónico, Rafael Di Tella and Juan Cruz Lopez Del Valle
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