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Explaining the Income-Distribution Puzzle in Happiness Research: Theory and Evidence

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  • Dluhosch, Barbara

    () (Helmut Schmidt University, Hamburg)

  • Horgos, Daniel

    () (Helmut Schmidt University, Hamburg)

  • Zimmermann, Klaus W.

    () (Helmut Schmidt University, Hamburg)

Abstract

The nexus between income and happiness is very much disputed. Many cross-sectional studies see a positive relationship, most longitudinal studies don’t. Starting from the fact that the theoretical basis in happiness research has been comparatively weak, we develop a model that identifies distributional consequences of unemployment with their importance conditional per-capita income as at the heart of the matter. Our theory is backed by empirical evidence on OECD data: in low-income countries, well-being significantly depends on income, in highincome countries on the unemployment-related Gini. Insofar, our findings establish the income-satiation hypothesis of longitudinal studies also in cross-sectional perspective.

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Bibliographic Info

Paper provided by Helmut Schmidt University, Hamburg in its series Working Paper with number 117/2012.

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Length: 26 pages
Date of creation: 20 Jun 2012
Date of revision:
Handle: RePEc:ris:vhsuwp:2012_117

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Keywords: Happiness; Welfare Economics; Income Distribution; Unemployment;

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