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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

Related research

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. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2002. "Instrumental variables and GMM: Estimation and testing," Boston College Working Papers in Economics 545, Boston College Department of Economics, revised 14 Feb 2003.
  2. 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).
  3. 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.
  4. 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.
  5. 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.
  6. Di Tella, Rafael & Alesina, Alberto & MacCulloch, Robert, 2004. "Inequality and Happiness: Are Europeans and Americans Different?," Scholarly Articles 4553007, Harvard University Department of Economics.
  7. David G. Blanchflower, 2008. "International evidence on well-being," NBER Working Papers 14318, National Bureau of Economic Research, Inc.
  8. Witold J. Henisz, 2002. "The institutional environment for infrastructure investment," Industrial and Corporate Change, Oxford University Press, vol. 11(2), pages 355-389.
  9. John Helliwell, 2005. "Well-Being, Social Capital and Public Policy: What's New?," NBER Working Papers 11807, National Bureau of Economic Research, Inc.
  10. Ada Ferrer-i-Carbonell & Paul Frijters, 2004. "How Important is Methodology for the estimates of the determinants of Happiness?," Economic Journal, Royal Economic Society, vol. 114(497), pages 641-659, 07.
  11. 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.
  12. Andrew E. Clark & Ed Diener & Yannis Georgellis & Richard E. Lucas, 2008. "Lags and Leads in Life Satisfaction: A Test of the Baseline Hypothesis," SOEPpapers on Multidisciplinary Panel Data Research 84, DIW Berlin, The German Socio-Economic Panel (SOEP).
  13. Fischer, Justina AV, 2009. "Subjective Well-Being as Welfare Measure: Concepts and Methodology," MPRA Paper 16619, University Library of Munich, Germany.
  14. David M. Drukker, 2003. "Testing for serial correlation in linear panel-data models," Stata Journal, StataCorp LP, vol. 3(2), pages 168-177, June.
  15. Bjørnskov, Christian & Drehe, Axel & Fischer, Justina A.V., 2008. "On decentralization and life satisfaction," Economics Letters, Elsevier, vol. 99(1), pages 147-151, April.
  16. Ovaska, Tomi & Takashima, Ryo, 2006. "Economic policy and the level of self-perceived well-being: An international comparison," The Journal of Socio-Economics, Elsevier, vol. 35(2), pages 308-325, April.
  17. 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.
  18. 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.
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Cited by:
  1. repec:old:wpaper:342 is not listed on IDEAS
  2. 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.
  3. repec:old:wpaper:343 is not listed on IDEAS
  4. Fischer, Justina AV, 2010. "Immigration, integration and terrorism: is there a clash of cultures?," MPRA Paper 27690, University Library of Munich, Germany.

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