Abstract
Our empirical analysis on the determinants of happiness on more than
100,000 individuals from representative samples in 82 world countries
supports the hypothesis that the time spent for relationships has a
significant and positive impacton happiness. This basic nexus helps
to understand new unexplored paths in the so called "happiness-income
paradox". To illustrate them we show that income has two main effects
on happiness. The first is a positive relative income effect which depends
on individual's ranking within domestic income deciles. The second is
determined by the relationship between income and relational goods.
In principle, more productive individuals may substitute (if the income
effect prevails over the substitution effect) working hours with the
nonworking time made free for enjoying relationships, when they have
strong preferences for the latter. The problem is that these individuals
tend to have ties with their income class peers who share with them
a high opportunity cost for the time spent for relationships.
Hence, a coordination failure may reduce the joint investment in relational
goods (local public goods which need to be co-produced in order to be
enjoyed together) and, through this effect, individuals in the highest
income deciles may end up with poorer relational goods. The impact of
income on happiness through this channel is therefore expected to be
negative.
1 Introduction
Economic policy prescriptions always imply an explicit or implicit ranking
of priorities incorporated into a given welfare function, which has
to be maximised under given resource constraints. The ultimate criteria
to define such priorities should be based on the knowledge of factors
determining human happiness, since the latter ought to be the main interest
and final goal of national and international policymakers' action. The
2003 World Bank report clearly outlines a broad framework for human
wellbeing which could inspire policymakers prescriptions along this
line (see Figure 1). In such framework it is acknowledged that (in addition
to income enabled consumption) human, environmental and social resources
are factors which, beyond being in most cases also production inputs,
have in themselves, through their direct fruition, a positive impact
on individual happiness.
If the World Bank welfare conception is a good description of the reality
of the human wellbeing, we expect education and quality of social ties
to have significant and positive effects on happiness, independently
from their expected contribution to indi vidual productivity and income.
While the impact of education on individual wellbeing has been thoroughly
explored in the empirical literature (Becker et al., 1997), evidence
on the impact of relational goods1 is, to our knowledge, very scarce.2
Several other reasons of interest exist, beyond the lack of empirical
work, to focus our research effort on the nexus between relational goods
and happiness.
First, the exploration of non monetary causes of happiness is not to
be considered outside the realm of economic analysis, as it may be of
great importance in understanding the deeper motivation of human economic
behaviour including consumption, productivity and entrepreneurship.
Second, growth oriented policy measures, which do not take into account
their eventual unintended consequences on non monetary factors affecting
individual happiness, may achieve their primary goal (economic growth),
but may miss the target of consolidating political consensus if they
generate undesirable negative effects on happiness.
In support of the relevance of happiness studies, Bruni and Porta (2004)
remind us that the acknowledgement of the importance of the investigation
on the wealth-happiness nexus goes back to Malthus (1798), Marshall
(1890), Veblen (1899) and, more recently, Dusenberry (1949) and Hirsch
(1976). In extreme synthesis, these authors remember that the transformation
of the mean (wealth) into the end of any human existence (happiness)
is the most important field of investigation for a social scientist.
The acknowledgement of the relevance for economic policies of the research
on the determinants of happiness does not imply a positive judgement
on its feasibility. One of the leading criticisms on this point is set
forth by the approach which argues that empirical analyses should be
carried out only on revealed preferences. This approach regards subjective
utility as non scientific since it is not objectively measurable (Frey
and Stutzer, 2002a).
On this point Frey and Stuzter (2002a) nicely reports Sen's (1986) sentence
on the fact that "the popularity of the positivistic view is due
to a mixture of an obsessive concern with observability and a peculiar
belief that choice...is the only human aspect that can be observed"
and provide several examples of nonobjectivist analyses such as theoretical
studies on emotions (Elster, 1998), self signalling, goal completion
mastery and meaning (Lowenstein, 1999) and status (Frank, 1985).
In defence of the reliability of data on self declared happiness, which
are at the basis of almost all empirical analyses in this field of the
literature, Alesina et al. (2001) recall that psychologists, whose core
professional activity is studying well being, extensively use these
data. They also observe that there exists a well documented evidence
of a positive correlation between self declared happiness and healthy
physical reactions such as smiling attitudes (Pavot 1991, Eckman et
al., 1990), heart rate and blood pressure responses to stress (Mayman
and Manis, 1993), electroencephalogram measures of parefrontal brain
activity (Sutton and Davidson, 1997) and of a negative correlation between
the same variable and the attitude to commit suicide (Koivumaa et al.,
2001).
Our belief on the validity of the above mentioned arguments, and the
importance of extending our knowledge into these new areas, motivates
our paper.
The paper is divided into seven sections (including introduction and
conclusions). In the second section we present a short survey on the
nexus between income, relational goods and happiness in two steps. First,
we explore the direct link between each of the first two variables and
happiness. Second, we investigate the complex nexus among the three,
which includes an indirect effect of income on happiness, through the
impact that the first variable has on relational goods. In this part
of the second section we formulate our hypothesis on direct and indirect
effects of income on happiness, and on the direct effect of the intensity
and time spent in relational goods on happiness itself, which will be
tested in the empirical analysis. In the third section we present descriptive
evidence on the positive link between income and happiness, time spent
for relational
goods and happiness, and on the nonpositive relationship between income
and time spent for relational goods.
In the fourth section we test our hypotheses on the above mentioned
links on the World Value Survey database, which includes representative
samples from 82 countries in the world,3 and test the robustness of
our findings to different (gender, geographical area, religious a±liation)
subsample splits.
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