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Competition and well-being: does market competition make people unhappy?

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Author Info

  • Fischer, Justina AV

    ()
    (Dept. of Economics, Stockholm School of Economics)

Abstract

Empirical research on the role of economic institutions for subjective well-being is still widely lacking, while recent economic-experimental outcomes suggest that experienced utility may depend on the intensity of market competition. This paper is the first to empirically analyze the implication of market competition for subjective well-being using real-life survey data on 80,000 individuals in more than 60 countries from the World Values Survey 1997-2001. In support of our hypothesis, we find that market competition aggravates the impact of individual’s bargaining position in economic transactions on her subjective well-being – compared to the least powerful in society. Put differently, we find that market competition enlarges the happiness differences caused by cleavages in socio-economic position. Our results also suggest that competition induced welfare changes are not gender-specific, while a stronger rule of law appears to prevent the generation of such additional benefits or losses. Particularly the latter results call for further economic-experimental corroboration in the laboratory, but also bear important policy implications.

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File URL: http://swopec.hhs.se/hastef/papers/hastef0697.pdf
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Bibliographic Info

Paper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 697.

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Length: 48 pages
Date of creation: 20 Mar 2008
Date of revision:
Handle: RePEc:hhs:hastef:0697

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Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
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Related research

Keywords: Subjective well-being; happiness; utility; competition; rule of law; completeness of contract; laboratory experiment; World Values Survey;

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References

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  1. Justina A.V. Fischer & Benno Torgler, 2007. "Social Capital and Relative Income Concerns: Evidence from 26 Countries," CREMA Working Paper Series 2007-05, Center for Research in Economics, Management and the Arts (CREMA).
  2. Bjørnskov, Christian & Drehe, Axel & Fischer, Justina A.V., 2008. "On decentralization and life satisfaction," Economics Letters, Elsevier, vol. 99(1), pages 147-151, April.
  3. Ernst Fehr & Georg Kirchsteiger & Arno Riedl, 2003. "Gift Exchange and Reciprocity in Competitive Experimental Markets," Labor and Demography 0305002, EconWPA.
  4. Frey, Bruno S & Stutzer, Alois, 2000. "Happiness, Economy and Institutions," Economic Journal, Royal Economic Society, vol. 110(466), pages 918-38, October.
  5. Christian Bjørnskov & Axel Dreher & Justina A. V. Fischer, 2006. "Cross-Country Determinants of Life Satisfaction:Exploring Different Determinants across Groups inSociety," STICERD - Political Economy and Public Policy Paper Series 21, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  6. Fehr, Ernst & Kirchsteiger, George & Riedl, Arno, 1993. "Does Fairness Prevent Market Clearing? An Experimental Investigation," The Quarterly Journal of Economics, MIT Press, vol. 108(2), pages 437-59, May.
  7. Muriel Niederle & Lise Vesterlund, 2007. "Do Women Shy Away from Competition? Do Men Compete Too Much?," The Quarterly Journal of Economics, MIT Press, vol. 122(3), pages 1067-1101, 08.
  8. John F. Helliwell & Haifang Huang, 2006. "How's Your Government? International Evidence Linking Good Government and Well-Being," NBER Working Papers 11988, National Bureau of Economic Research, Inc.
  9. Kachelmeier, Steven J. & Shehata, Mohamed, 1992. "Culture and competition: A laboratory market comparison between China and the West," Journal of Economic Behavior & Organization, Elsevier, vol. 19(2), pages 145-168, October.
  10. Christopher F Baum & Mark E Schaffer & Steven Stillman, 2002. "IVREG2: Stata module for extended instrumental variables/2SLS and GMM estimation," Statistical Software Components S425401, Boston College Department of Economics, revised 02 Jan 2014.
  11. Clark, Andrew E. & Frijters, Paul & Shields, Michael A., 2007. "Relative Income, Happiness and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," IZA Discussion Papers 2840, Institute for the Study of Labor (IZA).
  12. Guth, Werner & Schmittberger, Rolf & Schwarze, Bernd, 1982. "An experimental analysis of ultimatum bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 367-388, December.
  13. Martin Brown & Armin Falk & Ernst Fehr, 2004. "Relational Contracts and the Nature of Market Interactions," Econometrica, Econometric Society, vol. 72(3), pages 747-780, 05.
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Cited by:
  1. Bjornskov, Christian & Fischer, Justina AV & Dreher, Axel, 2008. "Formal Institutions and Subjective Well-Being: Revisiting the Cross-Country Evidence," MPRA Paper 17159, University Library of Munich, Germany, revised Jul 2009.
  2. Leonardo Becchetti & Andrew E. Clark & Elena Giachin Ricco, 2011. "The value of diplomacy: Bilateral relations and immigrant well-being," PSE Working Papers halshs-00580907, HAL.
  3. Justina A.V. Fischer & Benno Torgler, 2007. "Social Capital and Relative Income Concerns: Evidence from 26 Countries," CREMA Working Paper Series 2007-05, Center for Research in Economics, Management and the Arts (CREMA).
  4. repec:hal:wpaper:halshs-00580907 is not listed on IDEAS
  5. Bockerman, Petri & Ilmakunnas, Pekka & Johansson, Edvard, 2010. "Job security and employee well-being: Evidence from matched survey and register data," MPRA Paper 21961, University Library of Munich, Germany.
  6. Justina A.V. Fischer & Benno Torgler, 2013. "Do Positional Concerns Destroy Social Capital: Evidence From 26 Countries," Economic Inquiry, Western Economic Association International, vol. 51(2), pages 1542-1565, 04.

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