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The impact of inflation and unemployment on subjective personal and country evaluations

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  • Néstor Gándelman
  • Rubén Hernández-Murillo

Abstract

The authors use data from the Gallup World Poll to analyze what determines individual assessments of past, present, and future personal and country well-being. These measures allow the analysis of two dimensions of happiness data not previously examined in the literature: the better-than-average effect and optimism. The authors find that individuals tend to evaluate their personal well-being as being better than their country's and tend to expect that their future well-being will improve. The authors also analyze the impact of inflation and unemployment on these subjective measures and find that both variables have a negative effect on individuals' assessments of past and present well-being for themselves and their country; in contrast with other studies, however, they do not find that the effect of unemployment is significantly different from that of inflation.

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Bibliographic Info

Article provided by Federal Reserve Bank of St. Louis in its journal Review.

Volume (Year): (2009)
Issue (Month): May ()
Pages: 107-126

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Handle: RePEc:fip:fedlrv:y:2009:i:may:p:107-126:n:v.91no.3

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Keywords: Inflation (Finance) ; Unemployment;

References

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  1. Michael C. & Pao-Lin Tien, 2000. "Economic Discomfort and Consumer Sentiment," Eastern Economic Journal, Eastern Economic Association, vol. 26(1), pages 1-8, Winter.
  2. Wolfers, Justin, 2003. "Is Business Cycle Volatility Costly? Evidence from Surveys of Subjective Well-Being," Research Papers, Stanford University, Graduate School of Business 1751r, Stanford University, Graduate School of Business.
  3. David G. Blanchflower, 2007. "Is Unemployment More Costly Than Inflation?," NBER Working Papers 13505, National Bureau of Economic Research, Inc.
  4. Robert J. MacCulloch & Rafael Di Tella & Andrew J. Oswald, 2001. "Preferences over Inflation and Unemployment: Evidence from Surveys of Happiness," American Economic Review, American Economic Association, American Economic Association, vol. 91(1), pages 335-341, March.
  5. Easterly, William & Fischer, Stanley, 2001. "Inflation and the Poor," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 33(2), pages 160-78, May.
  6. Arjun Jayadev, . "The Class Content of Preferences Towards Anti-Inflation and Anti Unemployment Policies," Working Papers 8, University of Massachusetts Boston, Economics Department.
  7. David G. Blanchflower & Andrew J. Oswald, 2000. "Well-Being Over Time in Britain and the USA," NBER Working Papers 7487, National Bureau of Economic Research, Inc.
  8. Betsey Stevenson & Justin Wolfers, 2008. "Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox," NBER Working Papers 14282, National Bureau of Economic Research, Inc.
  9. Bernard M.S. van Praag & P. Frijters & A. Ferrer-i-Carbonell, 2002. "The Anatomy of Subjective Well-being," Tinbergen Institute Discussion Papers 02-022/3, Tinbergen Institute.
  10. Benoît, Jean-Pierre & Dubra, Juan & Moore, Don, 2009. "Does the Better-Than-Average Effect Show That People Are Overconfident?: An Experiment," MPRA Paper 13168, University Library of Munich, Germany.
  11. Scoppa Vincenzo & Ponzo Michela, 2008. "An Empirical Study of Happiness in Italy," The B.E. Journal of Economic Analysis & Policy, De Gruyter, De Gruyter, vol. 8(1), pages 1-23, June.
  12. Di Tella, Rafael & MacCulloch, Robert J. & Oswald, Andrew J., 2001. "The Macroeconomics of Happiness," The Warwick Economics Research Paper Series (TWERPS) 615, University of Warwick, Department of Economics.
  13. Benoît, Jean-Pierre & Dubra, Juan, 2007. "Overconfidence?," MPRA Paper 6017, University Library of Munich, Germany, revised Nov 2007.
  14. Chuang, Wen-I & Lee, Bong-Soo, 2006. "An empirical evaluation of the overconfidence hypothesis," Journal of Banking & Finance, Elsevier, Elsevier, vol. 30(9), pages 2489-2515, September.
  15. Bruno S. Frey & Alois Stutzer, 2001. "What Can Economists Learn from Happiness Research?," CESifo Working Paper Series 503, CESifo Group Munich.
  16. Rafael Di Tella & Robert MacCulloch, 2006. "Some Uses of Happiness Data in Economics," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 20(1), pages 25-46, Winter.
  17. Easterlin, Richard A., 1995. "Will raising the incomes of all increase the happiness of all?," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 27(1), pages 35-47, June.
  18. Dan Lovallo & Colin Camerer, 1999. "Overconfidence and Excess Entry: An Experimental Approach," American Economic Review, American Economic Association, American Economic Association, vol. 89(1), pages 306-318, March.
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Citations

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Cited by:
  1. David G. Blanchflower & Andrew J. Oswald, 2011. "International Happiness," NBER Working Papers 16668, National Bureau of Economic Research, Inc.
  2. HASAN, HAMID & Khan, Hayat, 2013. "Testing the Existence of Hedonic Adaptation and Inertia to Income with implications for Islamic economics: a case of Pakistan," MPRA Paper 44927, University Library of Munich, Germany.
  3. Néstor Gandelman & Giorgina Piani, 2013. "Quality of Life Satisfaction among Workers and Non-Workers in Uruguay," Social Indicators Research, Springer, Springer, vol. 111(1), pages 97-115, March.
  4. Mª del Salinas-Jiménez & Joaquín Artés & Javier Salinas-Jiménez, 2013. "How Do Educational Attainment and Occupational and Wage-Earner Statuses Affect Life Satisfaction? A Gender Perspective Study," Journal of Happiness Studies, Springer, Springer, vol. 14(2), pages 367-388, April.
  5. Stracca, Livio, 2013. "Financial imbalances and household welfare: empirical evidence from the EU," Working Paper Series, European Central Bank 1543, European Central Bank.
  6. Néstor Gándelman & Rubén Hernández-Murillo, 2011. "What do happiness and health satisfaction data tell us about relative risk aversion?," Working Papers, Federal Reserve Bank of St. Louis 2011-039, Federal Reserve Bank of St. Louis.
  7. Rubén Hernández-Murillo & Christopher J. Martinek, 2010. "The dismal science tackles happiness data," The Regional Economist, Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, issue Jan, pages 14-15.

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