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The Marginal Income Effect of Education on Happiness: Estimating the Direct and Indirect Effects of Compulsory Schooling on Well-Being in Australia

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  • Powdthavee, Nattavudh

    (Nanyang Technological University, Singapore)

  • Lekfuangfu, Warn N.

    (Universidad Carlos III de Madrid)

  • Wooden, Mark

    (Melbourne Institute of Applied Economic and Social Research)

Abstract

Many economists and educators favour public support for education on the premise that education improves the overall well-being of citizens. However, little is known about the causal pathways through which education shapes people's subjective well-being (SWB). This paper explores the direct and indirect well-being effects of extra schooling induced through compulsory schooling laws in Australia. We find the net effect of schooling on later SWB to be positive, though this effect is larger and statistically more robust for men than for women. We then show that the compulsory schooling effect on male's SWB is indirect and is mediated through income.

Suggested Citation

  • Powdthavee, Nattavudh & Lekfuangfu, Warn N. & Wooden, Mark, 2013. "The Marginal Income Effect of Education on Happiness: Estimating the Direct and Indirect Effects of Compulsory Schooling on Well-Being in Australia," IZA Discussion Papers 7365, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp7365
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    Cited by:

    1. Markus Frölich & Martin Huber, 2017. "Direct and indirect treatment effects–causal chains and mediation analysis with instrumental variables," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 79(5), pages 1645-1666, November.
    2. Martin Huber & Michael Lechner & Giovanni Mellace, 2017. "Why Do Tougher Caseworkers Increase Employment? The Role of Program Assignment as a Causal Mechanism," The Review of Economics and Statistics, MIT Press, vol. 99(1), pages 180-183, March.
    3. Viviana Celli, 2022. "Causal mediation analysis in economics: Objectives, assumptions, models," Journal of Economic Surveys, Wiley Blackwell, vol. 36(1), pages 214-234, February.
    4. Hamad, Rita & Elser, Holly & Tran, Duy C. & Rehkopf, David H. & Goodman, Steven N., 2018. "How and why studies disagree about the effects of education on health: A systematic review and meta-analysis of studies of compulsory schooling laws," Social Science & Medicine, Elsevier, vol. 212(C), pages 168-178.
    5. Beja Jr., Edsel, 2013. "Does economic prosperity bring about a happier society? Empirical remarks on the Easterlin Paradox debate," MPRA Paper 49446, University Library of Munich, Germany.
    6. Humaira Kamal Pasha, 2024. "Gender Differences in Education: Are Girls Neglected in Pakistani Society?," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(1), pages 3466-3511, March.
    7. Martin Huber & Mark Schelker & Anthony Strittmatter, 2022. "Direct and Indirect Effects based on Changes-in-Changes," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 40(1), pages 432-443, January.
    8. Viviana Celli, 2019. "Causal Mediation Analysis in Economics: objectives, assumptions, models," Working Papers 12/19, Sapienza University of Rome, DISS.
    9. Powdthavee, Nattavudh & Wooden, Mark, 2014. "What can life satisfaction data tell us about discrimination against sexual minorities? A structural equation model for Australia and the United Kingdom," LSE Research Online Documents on Economics 60278, London School of Economics and Political Science, LSE Library.
    10. Phumsith Mahasuweerachai & Siwarut Pangjai, 2018. "Does Piped Water Improve Happiness? A Case from Asian Rural Communities," Journal of Happiness Studies, Springer, vol. 19(5), pages 1329-1346, June.
    11. Bertermann, Alexander & Kamhöfer, Daniel A. & Schildberg-Hörisch, Hannah, 2023. "More Education Does Make You Happier – Unless You Are Unemployed," IZA Discussion Papers 16454, Institute of Labor Economics (IZA).
    12. Grenet, Julien & Grönqvist, Hans & Niknami, Susan, 2025. "The effects of electronic monitoring on offenders and their families," Working Paper Series 2025:12, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    13. Matthew Manning & Christopher M. Fleming & Christopher L. Ambrey, 2016. "Life Satisfaction and Individual Willingness to Pay for Crime Reduction," Regional Studies, Taylor & Francis Journals, vol. 50(12), pages 2024-2039, December.
    14. Beja Jr., Edsel, 2013. "Does economic prosperity bring about a happier society? Empirical remarks on the Easterlin Paradox debate sans Happiness Adaptation," MPRA Paper 50633, University Library of Munich, Germany.

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    More about this item

    Keywords

    indirect effect; well-being; mental health; schooling; windfall income; HILDA survey;
    All these keywords.

    JEL classification:

    • I20 - Health, Education, and Welfare - - Education - - - General
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation

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