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Accounting for Unobserved Country Heterogeneity in Happiness Research: Country Fixed Effects versus Region Fixed Effects

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Abstract

Many empirical studies are ambiguous about whether good formal institutions are conducive to subjective well-being or not. Possibly, this ambiguity is caused by cross-section models that do not account for unobserved cultural and institutional effects. Using the World Value Survey 1980-2005, this paper supports a positive relation in a country panel framework that accounts for unobserved, time-invariant country heterogeneity. This study also shows that using supra-national region dummies (by geography or language) in a country-random effects model appears to be a sufficient substitution for omitted country fixed effects.

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File URL: ftp://www.ceistorvergata.it/repec/rpaper/RP164.pdf
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Bibliographic Info

Paper provided by Tor Vergata University, CEIS in its series CEIS Research Paper with number 164.

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Length: 30 pages
Date of creation: 28 May 2010
Date of revision: 28 May 2010
Handle: RePEc:rtv:ceisrp:164

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Postal: CEIS - Centre for Economic and International Studies - Faculty of Economics - University of Rome "Tor Vergata" - Via Columbia, 2 00133 Roma
Phone: +390672595601
Fax: +39062020687
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Web page: http://www.ceistorvergata.it
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Postal: CEIS - Centre for Economic and International Studies - Faculty of Economics - University of Rome "Tor Vergata" - Via Columbia, 2 00133 Roma
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Web: http://www.ceistorvergata.it

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Keywords: Happiness; life satisfaction; well-being; quality of life; institutions; democracy; rule of law; political constraints; policy implications; panel econometrics;

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References

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  1. David G. Blanchflower, 2008. "International evidence on well-being," NBER Working Papers 14318, National Bureau of Economic Research, Inc.
  2. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2002. "Instrumental variables and GMM: Estimation and testing," North American Stata Users' Group Meetings 2003 05, Stata Users Group.
  3. Andrew E. Clark & Ed Diener & Yannis Georgellis & Richard E. Lucas, 2007. "Lags and leads in life satisfaction: a test of the baseline hypothesis," LSE Research Online Documents on Economics 19656, London School of Economics and Political Science, LSE Library.
  4. Alesina, Alberto & Di Tella, Rafael & MacCulloch, Robert, 2004. "Inequality and happiness: are Europeans and Americans different?," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 2009-2042, August.
  5. Bjørnskov, Christian & Dreher, Axel & Fischer, Justina A.V., 2010. "Formal institutions and subjective well-being: Revisiting the cross-country evidence," European Journal of Political Economy, Elsevier, vol. 26(4), pages 419-430, December.
  6. Christian Bjørnskov & Axel Dreher & Justina A.V. Fischer, 2005. "Cross-Country Determinants of Life Satisfaction: Exploring Different Determinants across Groups in Society," University of St. Gallen Department of Economics working paper series 2005 2005-19, Department of Economics, University of St. Gallen.
  7. David Dorn & Justina Fischer & Gebhard Kirchgässner & Alfonso Sousa-Poza, 2008. "Direct democracy and life satisfaction revisited: new evidence for Switzerland," Journal of Happiness Studies, Springer, vol. 9(2), pages 227-255, June.
  8. Dolan, Paul & Peasgood, Tessa & White, Mathew, 2008. "Do we really know what makes us happy A review of the economic literature on the factors associated with subjective well-being," Journal of Economic Psychology, Elsevier, vol. 29(1), pages 94-122, February.
  9. 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.
  10. Ovaska, Tomi & Takashima, Ryo, 2006. "Economic policy and the level of self-perceived well-being: An international comparison," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 35(2), pages 308-325, April.
  11. Jan Ott, 2010. "Good Governance and Happiness in Nations: Technical Quality Precedes Democracy and Quality Beats Size," Journal of Happiness Studies, Springer, vol. 11(3), pages 353-368, June.
  12. Bjørnskov, Christian & Drehe, Axel & Fischer, Justina A.V., 2008. "On decentralization and life satisfaction," Economics Letters, Elsevier, vol. 99(1), pages 147-151, April.
  13. Frijters, Paul & Johnston, David W. & Shields, Michael A., 2008. "Happiness Dynamics with Quarterly Life Event Data," IZA Discussion Papers 3604, Institute for the Study of Labor (IZA).
  14. Fischer, Justina AV, 2009. "Subjective Well-Being as Welfare Measure: Concepts and Methodology," MPRA Paper 16619, University Library of Munich, Germany.
  15. John F. Helliwell, 2006. "Well-Being, Social Capital and Public Policy: What's New?," Economic Journal, Royal Economic Society, vol. 116(510), pages C34-C45, 03.
  16. Ada Ferrer-i-Carbonell & Paul Frijters, 2002. "How important is Methodology for the Estimates of the Determinants of Happiness?," Tinbergen Institute Discussion Papers 02-024/3, Tinbergen Institute.
  17. David M. Drukker, 2003. "Testing for serial correlation in linear panel-data models," Stata Journal, StataCorp LP, vol. 3(2), pages 168-177, June.
  18. Witold J. Henisz, 2002. "The institutional environment for infrastructure investment," Industrial and Corporate Change, Oxford University Press, vol. 11(2), pages 355-389.
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Cited by:
  1. repec:old:wpaper:342 is not listed on IDEAS
  2. Heinz Welsch & Jan Kühling, 2011. "Anti-Inflation Policy Benefits the Poor: Evidence from Subjective Well-Being Data," Working Papers V-343-11, University of Oldenburg, Department of Economics, revised Dec 2011.
  3. Gehring, Kai, 2013. "Who Benefits from Economic Freedom? Unraveling the Effect of Economic Freedom on Subjective Well-Being," World Development, Elsevier, vol. 50(C), pages 74-90.
  4. Fischer, Justina AV, 2010. "Immigration, integration and terrorism: is there a clash of cultures?," MPRA Paper 27690, University Library of Munich, Germany.
  5. Gehring, Kai, 2012. "Benefit or burden? Unraveling the effect of economic freedom on subjective well-being," Working Papers 0531, University of Heidelberg, Department of Economics.
  6. repec:old:wpaper:343 is not listed on IDEAS
  7. Heinz Welsch & Jan Kühling, 2011. "Comparative Economic Performance and Institutional Change in OECD Countries: Evidence from Subjective Well-Being Data," Working Papers V-342-11, University of Oldenburg, Department of Economics, revised Dec 2011.

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