IDEAS home Printed from
   My bibliography  Save this paper

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


  • Dluhosch, Barbara

    () (Helmut Schmidt University, Hamburg)

  • Horgos, Daniel

    () (Helmut Schmidt University, Hamburg)

  • Zimmermann, Klaus W.

    () (Helmut Schmidt University, Hamburg)


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

    Download full text from publisher

    File URL:
    File Function: Full text
    Download Restriction: no

    References listed on IDEAS

    1. Petros C. Mavroidis & Patrick A. Messerlin & Jasper M. Wauters, 2008. "The Law and Economics of Contingent Protection in the WTO," Books, Edward Elgar Publishing, number 12731.
    2. James A. Brander & Barbara J. Spencer, 1981. "Tariffs and the Extraction of Foreign Monopoly Rents under Potential Entry," Canadian Journal of Economics, Canadian Economics Association, vol. 14(3), pages 371-389, August.
    3. Ethier, Wilfred J., 2007. "The theory of trade policy and trade agreements: A critique," European Journal of Political Economy, Elsevier, vol. 23(3), pages 605-623, September.
    4. Barbara J. Spencer & James A. Brander, 1982. "Tariff Protection and Imperfect Competition," Working Papers 517, Queen's University, Department of Economics.
    5. Hungerford, Thomas L., 1991. "GATT: A cooperative equilibrium in a noncooperative trading regime?," Journal of International Economics, Elsevier, vol. 31(3-4), pages 357-369, November.
    6. Pelc, Krzysztof J., 2010. "Constraining Coercion? Legitimacy and Its Role in U.S. Trade Policy, 1975–2000," International Organization, Cambridge University Press, vol. 64(01), pages 65-96, January.
    7. Subramanian, Arvind & Wei, Shang-Jin, 2007. "The WTO promotes trade, strongly but unevenly," Journal of International Economics, Elsevier, vol. 72(1), pages 151-175, May.
    8. Andrew K. Rose, 2004. "Do We Really Know That the WTO Increases Trade?," American Economic Review, American Economic Association, vol. 94(1), pages 98-114, March.
    9. Rhodes, Carolyn, 1989. "Reciprocity in trade: the utility of a bargaining strategy," International Organization, Cambridge University Press, vol. 43(02), pages 273-299, March.
    10. Ludema, Rodney D & Mayda, Anna Maria, 2010. "Do terms-of-trade effects matter for trade agreements? Evidence from WTO countries," CEPR Discussion Papers 7695, C.E.P.R. Discussion Papers.
    11. Limão, Nuno & Saggi, Kamal, 2008. "Tariff retaliation versus financial compensation in the enforcement of international trade agreements," Journal of International Economics, Elsevier, vol. 76(1), pages 48-60, September.
    12. Christopher S. P. Magee & Stephen P. Magee, 2008. "The United States is a Small Country in World Trade," Review of International Economics, Wiley Blackwell, vol. 16(5), pages 990-1004, November.
    13. Bhagwati, Jagdish, 1990. "Departures from Multilateralism: Regionalism and Aggressive Unilateralism," Economic Journal, Royal Economic Society, vol. 100(403), pages 1304-1317, December.
    14. Martin, Alberto & Vergote, Wouter, 2008. "On the role of retaliation in trade agreements," Journal of International Economics, Elsevier, vol. 76(1), pages 61-77, September.
    15. Kyle Bagwell & Robert W. Staiger, 2010. "The World Trade Organization: Theory and Practice," Annual Review of Economics, Annual Reviews, vol. 2(1), pages 223-256, September.
    16. Bown, Chad P. & Ruta, Michele, 2008. "The economics of permissible WTO retaliation," WTO Staff Working Papers ERSD-2008-04, World Trade Organization (WTO), Economic Research and Statistics Division.
    17. Keohane, Robert O., 1986. "Reciprocity in international relations," International Organization, Cambridge University Press, vol. 40(01), pages 1-27, December.
    18. Schwartz, Warren F & Sykes, Alan O, 2002. "The Economic Structure of Renegotiation and Dispute Resolution in the World Trade Organization," The Journal of Legal Studies, University of Chicago Press, vol. 31(1), pages 179-204, January.
    19. Bowen, T. Renee, 2010. "Limits of the WTO as a Self-Enforcing Institution," Research Papers 2071, Stanford University, Graduate School of Business.
    Full references (including those not matched with items on IDEAS)

    More about this item


    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

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:vhsuwp:2012_117. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Klaus Bekcmann). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.