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Reversing the Question. Does Happiness Affect Consumption and Savings Behavior?

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Author Info
Cahit Guven () (Deakin University)

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Abstract

Better understanding of the relationship between happiness and economic behavior may help design economic policies such as tax and retirement policies, and regulate the timing of macroeconomic announcements. I examine the impact of happiness on consumption and savings behavior. I use data from the DNB Household Survey from the Netherlands and the German Socio-Economic Panel. Instrumenting individual happiness with regional sunshine, the results suggest that happier people save more, spend less, and have a lower marginal propensity to consume. Happier people take more time for making decisions and have more control over expenditures; they expect a longer life and (accordingly) seem more concerned about the future than the present; they also expect less in ation in the future. The results of the paper might also help understand the observed low coefficient on income in any happiness equation that does not instrument income.

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File URL: http://www.deakin.edu.au/buslaw/aef/workingpapers/papers/2008_20eco.pdf
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Publisher Info
Paper provided by Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance in its series Economics Series with number 2008_20.

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Length: 55 pages
Date of creation: 30 Oct 2008
Date of revision:
Handle: RePEc:dkn:econwp:eco_2008_20

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Related research
Keywords: happiness; savings; consumption; climate;

Find related papers by JEL classification:
D03 - Microeconomics - - General - - - Behavioral Economics; Underlying Principles
D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters

References listed on IDEAS
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  1. Oswald, Andrew, 1997. "Happiness and Economic Performance," The Warwick Economics Research Paper Series (TWERPS) 478, University of Warwick, Department of Economics. [Downloadable!]
    Other versions:
  2. Matthew Rabin, 1998. "Psychology and Economics," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 11-46, March. [Downloadable!] (restricted)
  3. Daniel Kahneman & Alan B. Krueger, 2006. "Developments in the Measurement of Subjective Well-Being," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 3-24, Winter. [Downloadable!] (restricted)
  4. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2008. "Relative Income, Happiness, and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," Journal of Economic Literature, American Economic Association, vol. 46(1), pages 95-144, March.
    Other versions:
  5. Graham, Carol & Eggers, Andrew & Sukhtankar, Sandip, 2004. "Does happiness pay?: An exploration based on panel data from Russia," Journal of Economic Behavior & Organization, Elsevier, vol. 55(3), pages 319-342, November. [Downloadable!] (restricted)
  6. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
    Other versions:
  7. Freeman, Richard B, 1978. "Job Satisfaction as an Economic Variable," American Economic Review, American Economic Association, vol. 68(2), pages 135-41, May. [Downloadable!] (restricted)
    Other versions:
  8. Bruno S. Frey & Alois Stutzer, 2002. "What Can Economists Learn from Happiness Research?," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 402-435, June.
    Other versions:
  9. Rehdanz, Katrin & Maddison, David, 2005. "Climate and happiness," Ecological Economics, Elsevier, vol. 52(1), pages 111-125, January. [Downloadable!] (restricted)
    Other versions:
    • Katrin Rehdanz & David J. Maddison, 2003. "Climate and Happiness," Working Papers FNU-20, Research unit Sustainability and Global Change, Hamburg University, revised Apr 2003. [Downloadable!]
  10. Hoch, Stephen J & Loewenstein, George F, 1991. " Time-Inconsistent Preferences and Consumer Self-Control," Journal of Consumer Research: An Interdisciplinary Quarterly, University of Chicago Press, vol. 17(4), pages 492-507, March.
  11. Stutzer, Alois & Frey, Bruno S., 2006. "Does marriage make people happy, or do happy people get married?," The Journal of Socio-Economics, Elsevier, vol. 35(2), pages 326-347, April. [Downloadable!] (restricted)
    Other versions:
  12. Kenny, Charles, 1999. "Does Growth Cause Happiness, or Does Happiness Cause Growth?," Kyklos, Blackwell Publishing, vol. 52(1), pages 3-25.
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