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The Effects of Age and Job Protection on the Welfare Costs of Inflation and Unemployment: a Source of ECB anti-inflation bias?

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Author Info
BECCHETTI LEONARDO
CASTRIOTA STEFANO
GIUNTELLA OSEA

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Abstract

This paper extends the well known Di Tella et al. (2001 and 2003) analyses on the welfare costs of inflation and unemployment based on self-reported happiness data by looking at age and job market characteristic splits in a sample which includes more recent years and new countries. With both one and two stage estimating procedures we find support for the hypothesis that the relative welfare cost of unemployment versus inflation is higher than one (in contrast with the “equal-to-one” implicit assumption of the Misery Index). We also observe that the relative cost of unemployment is much higher in intermediate age cohorts and in low job protection countries. This might contribute to explain the higher concern for the level of economic activity of central bankers in countries with younger population

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Paper provided by Tor Vergata University, CEIS in its series Departmental Working Papers with number 245.

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Date of creation: Nov 2006
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Handle: RePEc:rtv:ceiswp:245

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Barro, Robert J. & Gordon, David B., 1983. "Rules, discretion and reputation in a model of monetary policy," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 101-121. [Downloadable!] (restricted)
    Other versions:
  2. Casey B. Mulligan & Xavier Sala-i-Martin, 1999. "Gerontocracy, Retirement, and Social Security," NBER Working Papers 7117, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. George A. Akerlof & William R. Dickens & George L. Perry, 1996. "The Macroeconomics of Low Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1996-1), pages 1-76. [Downloadable!]
  4. Darity, William A, Jr & Goldsmith, Arthur H, 1996. "Social Psychology, Unemployment and Macroeconomics," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 121-40, Winter. [Downloadable!] (restricted)
  5. Bruno S. Frey & Alois Stutzer, 2002. "What Can Economists Learn from Happiness Research?," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 402-435, June.
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  6. Joreg Bibow, 2005. "Refocusing the ECB on Output Stabilization and Growth through Inflation Targeting?," Macroeconomics 0507017, EconWPA. [Downloadable!]
  7. Clark, Andrew E & Georgellis, Yannis & Sanfey, Peter, 2001. "Scarring: The Psychological Impact of Past Unemployment," Economica, London School of Economics and Political Science, vol. 68(270), pages 221-41, May. [Downloadable!] (restricted)
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  8. Gustavo Piga, 2005. "On The Sources Of The Inflation Bias And Output Variability," Scottish Journal of Political Economy, Scottish Economic Society, vol. 52(4), pages 607-622, 09. [Downloadable!] (restricted)
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  9. Benjamin M. Friedman, 2004. "Why the Federal Reserve Should Not Adopt Inflation Targeting," International Finance, Blackwell Publishing, vol. 7(1), pages 129-136, 03. [Downloadable!] (restricted)
  10. L. Randall Wray & C. Sardoni, 2005. "Monetary Policy Strategies of the European Central Bank and the Federal Reserve Bank of the U.S," Macroeconomics 0511025, EconWPA. [Downloadable!]
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  11. Bruno S. Frey & Alois Stutzer, . "Happiness, Economy and Institutions," IEW - Working Papers iewwp015, Institute for Empirical Research in Economics - IEW. [Downloadable!]
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  12. Joerg Bibow, 2005. "Refocusing the ECB on Output Stabilization and Growth through Inflation Targeting?," Economics Working Paper Archive wp_425, Levy Economics Institute, The. [Downloadable!]
  13. Rafael Di Tella & Robert J. MacCulloch & Andrew J. Oswald, 2001. "Preferences over Inflation and Unemployment: Evidence from Surveys of Happiness," American Economic Review, American Economic Association, vol. 91(1), pages 335-341, March. [Downloadable!] (restricted)
  14. Di Tella, Rafael & MacCulloch, Robert J. & Oswald, Andrew J., 2001. "The Macroeconomics of Happiness," The Warwick Economics Research Paper Series (TWERPS) 615, University of Warwick, Department of Economics. [Downloadable!]
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  15. Frederic S. Mishkin, 2000. "What should central banks do?," Review, Federal Reserve Bank of St. Louis, issue Dec, pages 1-14. [Downloadable!]
  16. Frederic S. Mishkin, 2004. "Why the Federal Reserve Should Adopt Inflation Targeting," International Finance, Blackwell Publishing, vol. 7(1), pages 117-127, 03. [Downloadable!] (restricted)
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  18. Adam S. Posen, 1995. "Declarations Are Not Enough: Financial Sector Sources of Central Bank Independence," NBER Chapters, in: NBER Macroeconomics Annual 1995, Volume 10, pages 253-274 National Bureau of Economic Research, Inc. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Claudia Biancotti & Giovanni D'Alessio, 2008. "Values, inequality and happiness," Temi di discussione (Economic working papers) 669, Bank of Italy, Economic Research Department. [Downloadable!]
  2. Castriota Stefano, 2006. "Education and Happiness: a Further Explanation to theEasterlin Paradox?," Departmental Working Papers 246, Tor Vergata University, CEIS. [Downloadable!]
  3. Simon Luechinger & Stephan Meier & Alois Stutzer, 2008. "Why Does Unemployment Hurt the Employed?: Evidence from the Life Satisfaction Gap between the Public and Private Sectors," SOEPpapers 106, DIW Berlin, The German Socio-Economic Panel (SOEP). [Downloadable!]
    Other versions:
  4. Luechinger, Simon & Meier, Stephan & Stutzer, Alois, 2008. "Why Does Unemployment Hurt the Employed? Evidence from the Life Satisfaction Gap between the Public and the Private Sector," IZA Discussion Papers 3385, Institute for the Study of Labor (IZA). [Downloadable!]
  5. Rafael Di Tella & Robert MacCulloch, 2007. "Happiness, Contentment and Other Emotions for Central Banks," NBER Working Papers 13622, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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