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Monetary policy and happiness: Preferences over inflation and unemployment in Latin America

  • Ruprah, Inder J.
  • Luengas, Pavel

Using subjective well-being survey data for Latin America, we present evidence that both inflation and unemployment reduce well-being; where the cost of inflation in terms of unemployment, hence the relative size of the weights in a social well-being functions, is about one to eight, almost double of that found for OECD countries. The trade-off, and therefore the misery index, differs across subgroups. For example, the young and left-leaning citizens are more concerned with unemployment than inflation.

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File URL: http://www.sciencedirect.com/science/article/B6W5H-5120K39-1/2/f7a3adcca9864930d31e99e55d025f73
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Article provided by Elsevier in its journal Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics).

Volume (Year): 40 (2011)
Issue (Month): 1 (February)
Pages: 59-66

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Handle: RePEc:eee:soceco:v:40:y:2011:i:1:p:59-66
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620175

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  1. Wolfers, Justin, 2003. "Is Business Cycle Volatility Costly? Evidence from Surveys of Subjective Well-Being," International Finance, Wiley Blackwell, vol. 6(1), pages 1-26, Spring.
  2. Moura, Marcelo L. & de Carvalho, Alexandre, 2010. "What can Taylor rules say about monetary policy in Latin America?," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 392-404, March.
  3. Rafael Di Tella & Robert MacCulloch, 2006. "Some Uses of Happiness Data in Economics," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 25-46, Winter.
  4. David G. Blanchflower, 2008. "International evidence on well-being," NBER Working Papers 14318, National Bureau of Economic Research, Inc.
  5. Bruno S. Frey, 2008. "Happiness: A Revolution in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262062771, June.
  6. Böckerman, Petri & Ilmakunnas, Pekka, 2007. "Unemployment and self-assessed health: Evidence from panel data," MPRA Paper 1798, University Library of Munich, Germany.
  7. Andrew E. Clark, 2003. "Unemployment as a Social Norm: Psychological Evidence from Panel Data," Journal of Labor Economics, University of Chicago Press, vol. 21(2), pages 289-322, April.
  8. Robert J. MacCulloch & Rafael Di Tella & 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.
  9. Anders Björklund & Richard Freeman, 2008. "Searching for Optimal Inequality/Incentives," NBER Working Papers 14014, National Bureau of Economic Research, Inc.
  10. Woodford Michael, 2002. "Inflation Stabilization and Welfare," The B.E. Journal of Macroeconomics, De Gruyter, vol. 2(1), pages 1-53, February.
  11. David G. Blanchflower, 2007. "Is Unemployment More Costly Than Inflation?," NBER Working Papers 13505, National Bureau of Economic Research, Inc.
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