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Testing Theories of Happiness

  • Bruno S. Frey
  • Alois Stutzer

Happiness research in economics takes reported subjective well-being as a proxy measure for utility and has already provided many interesting insights about human well-being and its determinants. We argue that future research on happiness in economics has a lot of potential, but that it needs to be guided more by theory. We propose two ways to test theories of happiness, and illustrate them with two applications. First, reported subjective well-being can contribute towards a new understanding of utility in economics. Here, we study the introduction of income aspirations in individuals� utility functions in order to improve our understanding of how income affects individual well-being. Second, happiness data offers a new possibility of discriminating between different models of behavior. This is studied for theories of marriage, which crucially depend on auxiliary assumptions as to what contributes to well-being in marriage. Both applications are empirically tested with panel data for Germany.

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Paper provided by Institute for Empirical Research in Economics - University of Zurich in its series IEW - Working Papers with number 147.

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  1. Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, vol. 104(424), pages 648-59, May.
  2. Alois Stutzer & Bruno S. Frey, . "Does Marriage Make People Happy, Or Do Happy People Get Married?," IEW - Working Papers 143, Institute for Empirical Research in Economics - University of Zurich.
  3. Gruber Jonathan H & Mullainathan Sendhil, 2005. "Do Cigarette Taxes Make Smokers Happier," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-45, July.
  4. Gary S. Becker, 1974. "A Theory of Social Interactions," NBER Working Papers 0042, National Bureau of Economic Research, Inc.
  5. Helliwell, John F., 2003. "How's life? Combining individual and national variables to explain subjective well-being," Economic Modelling, Elsevier, vol. 20(2), pages 331-360, March.
  6. Clark, Andrew E & Oswald, Andrew J, 1993. "Satisfaction and Comparison Income," Economics Discussion Papers 10018, University of Essex, Department of Economics.
  7. Becker, Gary S, 1973. "A Theory of Marriage: Part I," Journal of Political Economy, University of Chicago Press, vol. 81(4), pages 813-46, July-Aug..
  8. Di Tella, Rafael & Alesina, Alberto & MacCulloch, Robert, 2004. "Inequality and Happiness: Are Europeans and Americans Different?," Scholarly Articles 4553007, Harvard University Department of Economics.
  9. Alois Stutzer & Rafael Lalive, 2004. "The Role of Social Work Norms in Job Searching and Subjective Well-Being," Journal of the European Economic Association, MIT Press, vol. 2(4), pages 696-719, 06.
  10. Bruno S. Frey & Alois Stutzer, . "What can Economists Learn from Happiness Research?," IEW - Working Papers 080, Institute for Empirical Research in Economics - University of Zurich.
  11. Yoram Weiss, . "The Formation and Dissolution of Families: Why Marry? Who Marries Whom? And What Happens Upon Marriage and Divorce," University of Chicago - Population Research Center 92-7a, Chicago - Population Research Center.
  12. Christopher D. Carroll & Jody Overland & David N. Weil, 1995. "Saving and growth with habit formation," Finance and Economics Discussion Series 95-42, Board of Governors of the Federal Reserve System (U.S.).
  13. Alois Stutzer & Bruno S. Frey, . "Stress That Doesn't Pay: The Commuting Paradox," IEW - Working Papers 151, Institute for Empirical Research in Economics - University of Zurich.
  14. Clark, Andrew E. & Oswald, Andrew J., 1998. "Comparison-concave utility and following behaviour in social and economic settings," Journal of Public Economics, Elsevier, vol. 70(1), pages 133-155, October.
  15. Robert Pollak, 2003. "Gary Becker's Contributions to Family and Household Economics," Review of Economics of the Household, Springer, vol. 1(1), pages 111-141, January.
  16. Bruno S. Frey & Alois Stutzer, 1999. "Measuring Preferences by Subjective Well-Being," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 155(4), pages 755-778, December.
  17. Clark, Andrew E., 1997. "Job satisfaction and gender: Why are women so happy at work?," Labour Economics, Elsevier, vol. 4(4), pages 341-372, December.
  18. Armin Falk & Markus Knell, . "Choosing the Joneses On the Endogeneity of Reference Groups," IEW - Working Papers 053, Institute for Empirical Research in Economics - University of Zurich.
  19. Ferrer-i-Carbonell, Ada, 2005. "Income and well-being: an empirical analysis of the comparison income effect," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 997-1019, June.
  20. Chun, Hyunbae & Lee, Injae, 2001. "Why Do Married Men Earn More: Productivity or Marriage Selection?," Economic Inquiry, Western Economic Association International, vol. 39(2), pages 307-19, April.
  21. Ernst Fehr & Simon Gaechter, 2000. "Fairness and Retaliation: The Economics of Reciprocity," CESifo Working Paper Series 336, CESifo Group Munich.
  22. Becker, Gary S, 1974. "A Theory of Marriage: Part II," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages S11-S26, Part II, .
  23. Alex Michalos & Bruno Zumbo, 2000. "Criminal Victimization and the Quality of Life," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 50(3), pages 245-295, June.
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