Dorn, D., Fischer, J. A., Kirchgässner, G., &Sousa-Poza, A. (2007). Is it culture or democracy? The impact of democracy and culture on happiness. Social Indicators Research, 82(3), 505-526.

We analyze the relation between democracy and perceived subjective well-being while controlling for other relevant determinants such as culture measured by languages. We conduct a cross-national analysis covering 28 countries using data from the 1998 International Social Survey Programme. Contrasting existing empirical evidence, we observe a significant positive relationship between democracy and happiness even when controlling for income and culture measured by language and religion. The effect of democracy on happiness is stronger in countries with an established democratic tradition.

 

Dorn, D., Fischer, J. A., Kirchgässner, G., &Sousa-Poza, A. (2007). Is it culture or democracy? The impact of democracy and culture on happiness. Social Indicators Research, 82(3), 505-526.

https://doi.org/10.1007/s11205-006-9048-4

Hamilton, B. H. (2000). Does entrepreneurship pay? An empirical analysis of the returns to self-employment. Journal of Political economy, 108(3), 604-631.

Possible explanations for earnings differentials in self‐employment and paid employment are investigated. The empirical results suggest that the nonpecuniary benefits of self‐employment are substantial: Most entrepreneurs enter and persist in business despite the fact that they have both lower initial earnings and lower earnings growth than in paid employment, implying a median earnings differential of 35 percent for individuals in business for 10 years. The differential cannot be explained by the selection of low‐ability employees into self‐employment and is similar for three alternative measures of self‐employment earnings and across industries. Furthermore, the estimated earnings differentials may understate the differences in compensation across sectors since fringe benefits are not included in the measure of employee compensation.

 


Hamilton, B. H. (2000). Does entrepreneurship pay? An empirical analysis of the returns to self-employment. Journal of Political economy, 108(3), 604-631.

https://doi.org/10.1086/262131

 

 

 

 

 

Clark, A. E., &Oswald, A. J. (1996). Satisfaction and comparison income. Journal of public economics, 61(3), 359-381.

This paper attempts to test the hypothesis that utility depends on income relative to a ‘comparison’ or reference level. Using data on 5,000 British workers, it provides two findings. First, workers’ reported satisfaction levels are shown to be inversely related to their comparison wage rates. Second, holding income constant, satisfaction levels are shown to be strongly declining in the level of education. More generally, the paper tries to help begin the task of constructing an economics of job satisfaction.

 

 

Clark, A. E., &Oswald, A. J. (1996). Satisfaction and comparison income. Journal of public economics, 61(3), 359-381.

https://doi.org/10.1016/0047-2727(95)01564-7

 

Clark, A. E. (2003). Unemployment as a social norm: Psychological evidence from panel data. Journal of labor economics, 21(2), 323-351.

 

This article uses seven waves of panel data to test for social norms in labor market status. The unemployed’s well‐being is shown to be strongly positively correlated with reference group unemployment (at the regional, partner, or household level). This result, far stronger for men, is robust to controls for unobserved individual heterogeneity. Panel data also show that those whose well‐being fell the most on entering unemployment are less likely to remain unemployed. These findings suggest a psychological explanation of both unemployment polarization and hysteresis, based on the utility effects of a changing employment norm in the reference group.

 

 

Clark, A. E. (2003). Unemployment as a social norm: Psychological evidence from panel data. Journal of labor economics, 21(2), 323-351.

https://doi.org/10.1086/345560

 

 

Alesina, A., Di Tella, R., &MacCulloch, R. (2004). Inequality and happiness: are Europeans and Americans different?. Journal of Public Economics, 88(9-10), 2009-2042.

 

We study the effect of the level of inequality in society on individual well-being using a total of 123,668 answers to a survey question about “happiness”. We find that individuals have a lower tendency to report themselves happy when inequality is high, even after controlling for individual income, a large set of personal characteristics, and year and country (or, in the case of the US, state) dummies. The effect, however, is more precisely defined statistically in Europe than in the US. In addition, we find striking differences across groups. In Europe, the poor and those on the left of the political spectrum are unhappy about inequality; whereas in the US the happiness of the poor and of those on the left is uncorrelated with inequality. Interestingly, in the US, the rich are bothered by inequality. Comparing across continents, we find that left-wingers in Europe are more hurt by inequality than left-wingers in the US. And the poor in Europe are more concerned with inequality than the poor in America, an effect that is large in terms of size but is only significant at the 10% level. We argue that these findings are consistent with the perception (not necessarily the reality) that Americans have been living in a mobile society, where individual effort can move people up and down the income ladder, while Europeans believe that they live in less mobile societies.

 

 

Alesina, A., Di Tella, R., &MacCulloch, R. (2004). Inequality and happiness: are Europeans and Americans different?. Journal of Public Economics, 88(9-10), 2009-2042.

https://doi.org/10.1016/j.jpubeco.2003.07.006

 

Falk, A., &Knell, M. (2004). Choosing the Joneses: endogenous goals and reference standards. Scandinavian Journal of Economics, 106(3), 417-435.

A growing economic literature stresses the importance of relative comparisons, e.g., for savings and consumption or happiness. In this literature it is usually assumed that reference standards against which people compare themselves are exogenously given. In contrast, findings from social psychology suggest that people play an active role in determining their reference standards. We introduce a social comparison model where people choose their reference standards to serve motives of self‐improvement and self‐enhancement. The model predicts that reference standards increase in individuals’ abilities and that people thus tend to compare themselves to similar others. The results of a questionnaire study confirm the prediction of the model.

 

 

Falk, A., &Knell, M. (2004). Choosing the Joneses: endogenous goals and reference standards. Scandinavian Journal of Economics, 106(3), 417-435.

https://doi.org/10.1111/j.0347-0520.2004.00370.x

 

 

Gerlach, K., &Stephan, G. (1996). A paper on unhappiness and unemployment in Germany. Economics Letters, 52(3), 325-330.

Fixed effects estimations with German data obtain the result that unemployment significantly lowers overall satisfaction with life. The results differ for men and women and are consistent with estimates of labor supply elasticities.

 


Gerlach, K., &Stephan, G. (1996). A paper on unhappiness and unemployment in Germany. Economics Letters, 52(3), 325-330.

https://doi.org/10.1016/S0165-1765(96)00858-0

 

 

 

 

 

Clark, A., Georgellis, Y., &Sanfey, P. (2001). Scarring: The psychological impact of past unemployment. Economica, 68(270), 221-241.

 

This paper considers the psychological impact of past unemployment. Using 11 waves of German panel data, we show that life satisfaction is lower not only for the current unemployed (relative to the employed), but also for those with higher levels of past unemployment. However, the negative wellbeing effect of current unemployment is weaker for those who have been unemployed more often in the past. The panel data also reveal some evidence that those suffering greater falls in wellbeing on entering unemployment are less likely to remain unemployed one year later. Together, these findings offer a psychological explanation of persistent unemployment.

 

 

Clark, A., Georgellis, Y., &Sanfey, P. (2001). Scarring: The psychological impact of past unemployment. Economica, 68(270), 221-241.

https://doi.org/10.1111/1468-0335.00243