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Explaining the Income-Distribution Puzzle in Happiness Research: Theory and Evidence

Author

Listed:
  • Dluhosch, Barbara

    () (Helmut Schmidt University, Hamburg)

  • Horgos, Daniel

    () (Helmut Schmidt University, Hamburg)

  • Zimmermann, Klaus W.

    () (Helmut Schmidt University, Hamburg)

Abstract

The nexus between income and happiness is very much disputed. Many cross-sectional studies see a positive relationship, most longitudinal studies don’t. Starting from the fact that the theoretical basis in happiness research has been comparatively weak, we develop a model that identifies distributional consequences of unemployment with their importance conditional per-capita income as at the heart of the matter. Our theory is backed by empirical evidence on OECD data: in low-income countries, well-being significantly depends on income, in highincome countries on the unemployment-related Gini. Insofar, our findings establish the income-satiation hypothesis of longitudinal studies also in cross-sectional perspective.

Suggested Citation

  • Dluhosch, Barbara & Horgos, Daniel & Zimmermann, Klaus W., 2012. "Explaining the Income-Distribution Puzzle in Happiness Research: Theory and Evidence," Working Paper 117/2012, Helmut Schmidt University, Hamburg.
  • Handle: RePEc:ris:vhsuwp:2012_117
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    More about this item

    Keywords

    Happiness; Welfare Economics; Income Distribution; Unemployment;

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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