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Effects of Happiness on Income Generation and Inequality

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  • Satya Paul

Abstract

This paper examines how happiness affects the income generating capacity of individuals and thereby the distribution of income. It is hypothesized that happiness impacts upon the income generating capacity of individuals directly by stimulating work efficiency, and indirectly by affecting their allocation of time for paid work. Both these effects of happiness on income are tested in a model consisting of an income generating function and a work-hour equation. The Australian panel survey data from the first 14 Waves of HILDA (2001-2014) are used to estimate the model. The income flows of happiness and other variables obtained from the model are inserted into the inequality decomposition equations (rules) to obtain their relative contributions. The study concludes that happiness has a positive and significant effect on income generation and contributes to the reduction of inequality in Australia.

Suggested Citation

  • Satya Paul, 2018. "Effects of Happiness on Income Generation and Inequality," Departmental Working Papers 2018-10, The Australian National University, Arndt-Corden Department of Economics.
    • Handle: RePEc:pas:papers:2018-10
    as

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    File URL: https://acde.crawford.anu.edu.au/sites/default/files/publication/crawford01_cap_anu_edu_au/2018-04/acde_2018_-10_final.pdf
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Happiness; Health; Income inequality; income generating model;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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