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The Value of Reunification in Germany: An Analysis of Changes in Life Satisfaction

  • Frijters, Paul

    ()

    (University of Queensland)

  • Haisken-DeNew, John P.

    ()

    (Melbourne Institute of Applied Economic and Social Research)

  • Shields, Michael A.

    ()

    (Monash University)

We quantify the value of changes in life circumstances in Germany following reunification. To this end, we develop and implement a fixed-effect estimator for ordinal life satisfaction in the German Socio-Economic Panel. We find strong negative effects on life satisfaction from being recently fired, losing a spouse through either death or separation and time spent in hospital, whilst we find strong positive effects from income and marriage. Using a new causal decomposition technique, we find that East Germans experienced a continued improvement in life satisfaction after 1990 to which increased household incomes contributed around 12%. Most of the increase is explained by improved average circumstances, such as public services. For West Germans, we find virtually no change in satisfaction between 1991 and 1999.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 419.

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Length: 38 pages
Date of creation: Jan 2002
Date of revision:
Publication status: published in: Journal of Human Resources, 2004, 39 (3), 649-674
Handle: RePEc:iza:izadps:dp419
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  2. Bruno S. Frey & Alois Stutzer, . "Happiness, Economy and Institutions," IEW - Working Papers 015, Institute for Empirical Research in Economics - University of Zurich.
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  15. Shields, Michael A & Wailoo, Allan, 2002. "Exploring the Determinants of Unhappiness for Ethnic Minority Men in Britain," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(4), pages 445-66, September.
  16. Hunt, Jennifer, 2000. "Why Do People Still Live in East Germany?," IZA Discussion Papers 123, Institute for the Study of Labor (IZA).
  17. Oswald, A.J., 1997. "Happiness and Economic Performance," Papers 18, Centre for Economic Performance & Institute of Economics.
  18. Easterlin, Richard A., 1995. "Will raising the incomes of all increase the happiness of all?," Journal of Economic Behavior & Organization, Elsevier, vol. 27(1), pages 35-47, June.
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  22. Korpi, Tomas, 1997. "Is utility related to employment status? Employment, unemployment, labor market policies and subjective well-being among Swedish youth," Labour Economics, Elsevier, vol. 4(2), pages 125-147, June.
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