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

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  • 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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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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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. 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, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE 21, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  2. Frey, Bruno S & Stutzer, Alois, 2000. "Happiness, Economy and Institutions," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 110(466), pages 918-38, October.
  3. 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.
  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, American Economic Association, vol. 46(1), pages 95-144, March.
  5. Justina A.V. Fischer & Benno Torgler, 2007. "Social capital and relative income concerns: evidence from 26 countries," University of St. Gallen Department of Economics working paper series 2007, Department of Economics, University of St. Gallen 2007-05, Department of Economics, University of St. Gallen.
  6. Muriel Niederle & Lise Vesterlund, 2005. "Do Women Shy Away from Competition? Do Men Compete too Much?," Discussion Papers, Stanford Institute for Economic Policy Research 04-030, Stanford Institute for Economic Policy Research.
  7. Martin Brown & Armin Falk & Ernst Fehr, 2004. "Relational Contracts and the Nature of Market Interactions," Econometrica, Econometric Society, Econometric Society, vol. 72(3), pages 747-780, 05.
  8. 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 28 Jul 2014.
  9. Georg Kirchsteiger & Ernst Fehr & Arno Riedl, 1993. "Does Fairness Prevent Market Clearing? An Experimental Investigation," ULB Institutional Repository 2013/5927, ULB -- Universite Libre de Bruxelles.
  10. David Dorn & Justina Fischer & Gebhard Kirchgässner & Alfonso Sousa-Poza, 2007. "Is It Culture or Democracy? The Impact of Democracy and Culture on Happiness," Social Indicators Research, Springer, Springer, vol. 82(3), pages 505-526, July.
  11. Fehr, Ernst & Kirchsteiger, Georg & Riedl, Arno, 1995. "Gift Exchange and Reciprocity in Competitive Experimental Markets," Economics Series, Institute for Advanced Studies 14, Institute for Advanced Studies.
  12. Kachelmeier, Steven J. & Shehata, Mohamed, 1992. "Culture and competition: A laboratory market comparison between China and the West," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 19(2), pages 145-168, October.
  13. Bjørnskov, Christian & Drehe, Axel & Fischer, Justina A.V., 2008. "On decentralization and life satisfaction," Economics Letters, Elsevier, Elsevier, vol. 99(1), pages 147-151, April.
  14. Guth, Werner & Schmittberger, Rolf & Schwarze, Bernd, 1982. "An experimental analysis of ultimatum bargaining," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 3(4), pages 367-388, December.
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Cited by:
  1. repec:hal:wpaper:halshs-00580907 is not listed on IDEAS
  2. Justina Fischer & Benno Torgler, 2008. "Social Capital and Relative Income Concerns: Evidence from 26 Countries," TWI Research Paper Series, Thurgauer Wirtschaftsinstitut, Universität Konstanz 38, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
  3. Bjornskov, Christian & Dreher, Axel & Fischer, Justina AV, 2008. "Formal Institutions and Subjective Well-Being: Revisiting the Cross-Country Evidence," MPRA Paper 20488, University Library of Munich, Germany, revised 06 Feb 2010.
  4. Böckerman, Petri & Ilmakunnas, Pekka & Johansson, Edvard, 2011. "Job security and employee well-being: Evidence from matched survey and register data," Labour Economics, Elsevier, Elsevier, vol. 18(4), pages 547-554, August.
  5. Fischer, Justina A.V. & Torgler, Benno, 2011. "Do Positional Concerns Destroy Social Capital: Evidence from 26 Countries," MPRA Paper 28650, University Library of Munich, Germany.
  6. Leonardo Becchetti & Andrew E. Clark & Elena Giachin Ricca, 2011. "The Value of Diplomacy: Bilateral Relations and Immigrant Well-Being," CEIS Research Paper, Tor Vergata University, CEIS 190, Tor Vergata University, CEIS, revised 29 Mar 2011.

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