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Can the Large Swings in Russian Life Satisfaction Be Explained by Ups and Downs in Real Incomes?

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Abstract

Russians reported large changes in their life satisfaction over the post-transition years. In this paper, we explore the factors that drove these changes, focusing on exogenous income changes, using panel data from the Russian Longitudinal Monitoring Survey over the period 1995 to 2001 and implementing a recently developed ordinal fixed-effects estimator. We apply a causal decomposition technique that allows for bias arising from panel attrition when establishing aggregate trends in life satisfaction. Changes in real household incomes explained 10% of the total change in reported life satisfaction between 1996 and 2000, but up to 30% of some year-on-year changes. Copyright The editors of the "Scandinavian Journal of Economics" 2006 .

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... We use survey data from the Polish Social Diagnosis project (Czapinski and Panek 2015), which covers the period from 1991 to 2015, and data from the Russian Longitudinal Monitoring Survey (RLMS) covering the years 1994-2014. The latter dataset has been extensively used to study happiness in Russia in previous research (see, e.g., Graham et al. 2004;Senik 2004;Frijters et al. 2006). There are also a few papers using the Social Diagnosis survey to study happiness in Poland ( Baranowska and Matysiak 2011;Michoń 2014). ...
... Similarly, the diminishing marginal utility hypothesis suggesting that there are decreasing gains from income for wealthy people was also verified positively. Guriev andZhuravskaya (2009) andFrijters et al. (2006) found also that the effect of absolute income on happiness is much bigger in transition countries than in other countries. The familiar Easterlin paradox (showing that happiness and GDP are unrelated over time) did not occur in Russia (Frijters et al. 2006;Guriev and Zhuravskaya 2009) and some other transition countries, but not in all of them. ...
... Guriev andZhuravskaya (2009) andFrijters et al. (2006) found also that the effect of absolute income on happiness is much bigger in transition countries than in other countries. The familiar Easterlin paradox (showing that happiness and GDP are unrelated over time) did not occur in Russia (Frijters et al. 2006;Guriev and Zhuravskaya 2009) and some other transition countries, but not in all of them. ...
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This paper studies the determinants of changes in unhappiness rate (low happiness, poverty of happiness, misery) over time. We focus on two post-socialist countries, Poland and Russia, which experienced radical social and economic transformations since the collapse of communism. Using data from the Polish Social Diagnosis project for 1991–2015 and data from the Russian Longitudinal Monitoring Survey for 1994–2014, we investigate the microeconomic determinants of spectacular declines in unhappiness rates observed in the studied periods in Poland (a 56% fall in unhappiness) and Russia (a drop in the range from 46 to 75% depending on the unhappiness threshold chosen). Using a nonlinear decomposition methodology, we split the overall decreases in unhappiness rates into characteristics effects (related to the changing distribution of unhappiness-affecting factors) and coefficients effects (due to changing returns to the unhappiness-affecting factors). Our results show that unhappiness reductions in both countries were mostly driven by coefficient effects, while characteristics played a smaller, but a non-negligible role. In both countries, income growth accounted for about 15% of the total unhappiness reduction. In Russia, this effect was doubled by growing return to income as unhappiness-protecting factor, while in Poland income has been losing protecting power and in overall income had an unhappiness-increasing effect. For Russia, another strong unhappiness-protecting factor was return to employment. In case of Poland, good self-rated health and having children explains additional 15–20% of the unhappiness reduction.
... We introduce the data and show the results for the estimation of the satisfaction equation in the …rst subsection. These results are very similar to those obtained with the same data by other authors (Frijters et al. 2006, Graham et al. 2004, Ravallion and Lokshin 2001, Senik 2004, and Zavisca and Hout 2005. In the second subsection we compute equivalent incomes, and examine how their distribution compares with metrics based on satisfaction and on expenditures. ...
... Standard errors are corrected for clustering at the household level. To incorporate individual …xed e¤ects, we follow the approach proposed by Ferrer-i-Carbonell and and applied by and Frijters et al. (2006) to German and Russian satisfaction data. While this extension of the original Chamberlain (1980) approach allows to use the available information more e¢ ciently, it is computationally cumbersome. ...
... For the housing dimension, which 28 Our results are rather robust if we implement other de…nitions of reference groups (including clustering on age, gender, education, being member of a minority, living in the same household). 29 The geographical approach has also been explored by Luttmer (2004) and has been implemented on the RLMS-HSE-data by Frijters et al. (2006). 30 Although this result is di¤erent from what is found in most previous work on unemployment (see e.g. ...
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In this paper, we study interpersonal comparisons of wellbeing. We show that using subjective wellbeing (SWB) levels can be in conflict with individuals' judgments about their own lives. We propose therefore an alternative wellbeing measure in terms of equivalent incomes that respects individual preferences. We show how SWB surveys can be used to derive the ordinal information about preferences needed to calculate equivalent incomes. We illustrate our approach with Russian panel data (RLMS-HSE) for the period 1995–2003 and compare it to standard wellbeing measures such as expenditures and SWB. We find that different groups are identified as worst off. For nothing is more certain, than that despair has almost the same effect on us with enjoyment, and that we are no sooner acquainted with the impossibility of satisfying any desire, than the desire itself vanishes. David Hume, A Treatise of Human Nature
... Several studies have examined the impact of income or wealth on life satisfaction in transitional nations that have experienced economic upheaval. For example, Frijters et al. (2006) explore the rapid rise of the life span of Russians from 1995 to 2001, which they find to be correlated positively with income and negatively with failed marriages. Wealth also seems to play an important positive role in life satisfaction in transition economies. ...
... While the WVS surveyors gathered information on various relationship statuses, marriage was considered to be the most relevant to life satisfaction, given previous research on the subject. For example, in their study of life satisfaction in Russia, Frijters et al. (2006) find a negative correlation between happiness and failed marriages. Thus, the final regressor in Equation (1) above, Marriage, is a dummy variable equal to 1 for survey respondents who are married, and 0 otherwise. ...
... Thus, the final regressor in Equation (1) above, Marriage, is a dummy variable equal to 1 for survey respondents who are married, and 0 otherwise. Based on the study by Frijters et al. (2006), we expect that the estimate for b 5 in Equation (1) will exceed zero. ...
Article
This study explores the life satisfaction of Egyptians – with a particular focus on the impact of higher education on happiness – both before and after that country's Arab Spring of 2011. Ordered logit results point to positive and significant relationships between life satisfaction and both perceived high incomes and the human capital variable, good health, for the pre- and post-Arab Spring periods in Egypt, thus confirming prior studies of transition economies. For a second human capital variable – secondary education – the results indicate a positive and significant relationship with happiness in pre-Arab Spring Egypt, while that relationship for post-Arab Spring Egypt is negative and significant. This particular finding is probably the result of the failure of educated Egyptians to achieve a better life despite their investments in human capital – due to the lack of opportunity that accompanied the failure of the country's Arab Spring to change the political and social environment. © 2016 The Authors Economics of Transition © 2016 The European Bank for Reconstruction and Development Published by Blackwell Publishing Ltd
... The remainder of the paper is organized as follows. In Section 2, we define the model and derive a representation theorem that extends the classical one-dimensional result of Foster and Shorrocks (1991). In Section 3, we combine this theorem with the recent work by Fleurbaey andManiquet (2017, 2018a, b) on well-being measurement to derive two families of poverty measures. ...
... We are now equipped to state and prove the following representation result. 7 It is a straightforward generalization of a result obtained by Foster and Shorrocks (1991) in the standard one-dimensional framework. If we gather the above axioms, the resulting poverty index needs to be additively separable in individual characteristics (x i , R i ). ...
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We propose a new approach to multidimensional poverty measurement. To aggregate and weight the different dimensions of poverty, we rely on the preferences of the concerned individuals rather than on an arbitrary weighting scheme selected by the analyst. We provide an axiomatic characterization of an approach in which multidimensional poverty measures add up individual indices of poverty based on their multidimensional outcomes and their preferences. We discuss two families of these individual indices of poverty: quantity metrics and money metrics. Members of the first family evaluate individual poverty by the fraction of the poverty line vector to which the individual is indifferent. The second family considers the ratio between the income to which the individual is indifferent, for some fixed price vector, and the money value of the poverty line vector. We illustrate our approach with Russian survey data between 1995 and 2005. We find that, compared to standard poverty indices, our preference-sensitive indices lead to considerable differences in the identification of the poor.
... Although well-being and happiness have been explored from a plethora of factors, income is perhaps by far, the most researched (Deaton, 2008;Frijters, Geishecker, Haisken-DeNew, & Shields, 2006;Luhmann, Schimmack, & Eid, 2011;Stevenson & Wolfers, 2008;Tibesigwa, Visser, & Hodkinson, 2016), from a parental income and child well-being dyad (Blau, 1999;Brooks-Gunn & Duncan, 1997), personal income (Ravallion & Lokshin, 2002) as well as interdependent welfare functions (Bookwalter & Dalenberg, 2010;Frijters et al., 2006;Kingdon & Knight, 2007). Easterlin (1974) famously argued that increasing average income does not enhance average well-being, a claim widely referred to as the Easterlin Paradox. ...
... Although well-being and happiness have been explored from a plethora of factors, income is perhaps by far, the most researched (Deaton, 2008;Frijters, Geishecker, Haisken-DeNew, & Shields, 2006;Luhmann, Schimmack, & Eid, 2011;Stevenson & Wolfers, 2008;Tibesigwa, Visser, & Hodkinson, 2016), from a parental income and child well-being dyad (Blau, 1999;Brooks-Gunn & Duncan, 1997), personal income (Ravallion & Lokshin, 2002) as well as interdependent welfare functions (Bookwalter & Dalenberg, 2010;Frijters et al., 2006;Kingdon & Knight, 2007). Easterlin (1974) famously argued that increasing average income does not enhance average well-being, a claim widely referred to as the Easterlin Paradox. ...
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Business leaders and policymakers within service economies are placing greater emphasis on well-being, given the role of workers in such settings. Whilst people’s well-being can lead to economic growth, it can also have the opposite effect if overlooked. Therefore, enhancing subjective well-being (SWB) is pertinent for all organisations for the sustainable development of an economy. While health conditions were previously deemed the most reliable predictors, the availability of data on people’s personal lifestyles now offers a new dimension into well-being for organisations. Using open data available from the national Annual Population Survey in the UK, which measures SWB, this research uncovered that among several independent variables to predict varying levels of people's perceived well-being, long-term health conditions, one's marital status, and age played a key role in SWB. The proposed model provides the key indicators of measuring SWB for organisations using big data.
... Individual fixed effects are captured using a method approximating the "fixed effect ordered logit" developed by Ferrer-i Carbonell and Frijters (2004), and further discussed by Frijters et al. (2006). In practice, this is estimated as a modification of the Chamberlain (1980) binary conditional fixed-effects logit model, with the modification allowing for an individual-specific rather than common life satisfaction threshold for each individual. ...
... The resulting model results in a loss of only 8% of the observations. A Hausman test confirms that fixed effects rather than random effects are appropriate, in line with a finding in the SWB literature that most panel studies examining determinants of life satisfaction have rejected the random effects assumption i.e. the unobservable individual effects have been found in fact to be correlated with the explanatory variables (Frijters et al. 2006). ...
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Policymakers have begun looking for multidimensional alternatives to income-based measures for assessing well-being in societies. The Human Development Index (HDI) and related composite indices have been widely criticized in the welfare economic literature, yet are still some of the most influential income-alternatives in the research and policy arena. What are the theoretical links that bridge the gap between these composite indices and the criticisms levelled at them? This paper introduces the “preference index approach,” a multidimensional measure bringing together the “equivalence approach” and the “distance function” in welfare economic theory. It retains convenient similarities with HDI-type composite indices, but assesses well-being in a way that reflects interpersonal differences in preferences between dimensions of well-being, whilst retaining comparability of well-being levels between individuals. The approach is applied empirically with data from the British Household Panel Survey (BHPS) to estimate different preference types between well-being dimensions. The empirical application finds that preferences differ by age, education level and unemployment status, and finds a weaker preference for the health and income dimension within older groups. Across all groups, health is strongly prioritized over income. When preference heterogeneities are taken into account, the picture of well-being looks quite different than that painted by standard welfare measures.
... Interestingly, authors noted that this welfare loss of unemployed population can not be restored once those individuals become employed, unless they experience income gain. Frijters et al. (2006) also found income to be a key predictor of life satisfaction in Russia. Particularly, around 10% of improvement in subjective wellbeing was explained by real household income. ...
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Over the past decade there has been growing interest in the determinants of life satisfaction. Within this literature, a new strand has emerged that investigates the link between appearance and subjective wellbeing. This paper contributes to this avenue of research by exploring the association between height and life satisfaction in Russia. Data for this study was taken from the RLMS, a series of nationally representative surveys designed to monitor the effects of Russian reforms on the health and economic welfare of households and individuals in the Russian Federation. Our sample covering more than 90,000 observations shows that there is inverted U-shaped association between height and life satisfaction. Controlling for potential antecedents of life satisfaction, we found that the turning point for height was around 177 cm.
... It has been proposed that social and economic hardships, a high crime rate, and high levels of alcohol consumption are among the main factors that contribute to relatively low levels of life satisfaction in Russia, although the direction and presence of the cause and effect may be disputed (Frijters, Geishecker, Haisken-DeNew, & Shields, 2006;Massin & Kopp, 2014;Stickley, Koyanagi, Roberts, Goryakin, & McKee, 2015). It is well known that in countries with high levels of human development, life satisfaction becomes disentangled from money (Diener & Biswas-Diener, 2002;Diener, Diener, & Diener, 1995;Diener & Seligman, 2004;Kuppens et al., 2008). ...
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Participants (N = 10,672 with the mean age of 20.7 years) of the Russian Character and Personality Survey (RCPS), involving 40 universities or colleges from across the Russian Federation, rated their happiness and satisfaction with life; the ratings were combined into an index of subjective well-being (SWB). Using the National Character Survey (NCS), participants also rated their own personality characteristics as well as those of an ideal person and a typical Russian living in their own region. Only two personality (test) subscales—N3: Depression and E6: Positive Emotions—were correlated with SWB on the between-individual level of analysis. Although spiritual values associated with a negative attitude toward money are typically regarded as an essential part of the Russian national character, our results demonstrated that only satisfaction with one’s own financial situation was a reliable predictor of SWB. In those regions where people had, on average, a higher life expectancy, better education, and a higher level of wealth, individuals also tended to be happier and more satisfied with their lives.
... With few exceptions (Blanchflower and Oswald, 2008;Deaton, 2008;Steptoe et al., 2015), studies of subjective well-being in the ECA region have not focused on an in-depth analysis of the interdependence between this variable and age. Rather, well-being regressions in most studies use age only as a potential covariate that is controlled when examining the association between well-being and such aspects as income (Frijters et al., 2006), the transition process (Hayo, 2007), and/or the correlations among different subjective welfare measures (Cojocaru and Diagne 2015). In contrast to Deaton (2008) and Steptoe et al. (2015), these ECA studies consistently find a U-shaped pattern across the region, although they differ in both the way that well-being is defined 4 and the precise shape and location of the minimum. ...
... The estimated coefficient of household size suggests that individuals living in larger households have higher levels of life satisfaction, while having young children, age 7 and under, decreases individual life satisfaction (Dolan et al., 2008). Frijters et al. (2006) also find that younger children are more likely to suppress the life satisfaction of their parents. ...
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This paper develops a theoretical framework and provides empirical evidence on the impacts of diet and lifestyles on life satisfaction in Russia using 1995‐2005 data from the Russian Longitudinal Monitoring Survey. Our results suggest that diet measured as calories, fat, protein, and diversity of food consumption has a statistically significant effect on life satisfaction levels of the Russian population. In addition, living in a region with higher per capita income increases population's life satisfaction. While living in a rural area, having health problems, and having young children affect individual life satisfaction in Russia in a negative and statistically significantly way. Life satisfaction is also positively correlated with education and income, and negatively with unemployment. Better understanding of the drivers of life satisfaction and more generally of subjective wellbeing in Russia can assist in the government decision‐making processes, including the allocation of scarce resources and the design of public health policies. This article is protected by copyright. All rights reserved
... Using cross-section survey data, research has found a positive impact of income on SWB up to a certain threshold, for both developed and developing countries (Blanchflower and Oswald 2004;Lelkes 2006). The dynamic relation between income and SWB, i.e., how changes in income affect changes in SWB, has also been estimated using panel data to control for unobserved individual effects to find that there is a causal effect of income on SWB (Ravallion and Lokshin 2002;Frijters et al. 2006). To account for nonlinearity, we include income squared, spouse/partner's pay squared, and age squared since using logincome in SWB equations may hide important departures from log-linearity (Clark et al. 2008). ...
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The paper investigates the extent to which life-satisfaction is biased by peer-comparison by looking at the relative value attached to the different domains of life-satisfaction, as suggested by Easterlin (Economics and happiness: framing the analysis, Oxford University Press, New York, 2005), by social group. We postulate that group membership influences the ranking of the satisfaction domains affecting subjective well-being which allows individuals to go back to their individual threshold over time. Using ordered probit models with random effects, the evidence for professional (self-employed vs. employee) and social (male vs. female) groups using the British Household Panel Survey and Understanding Society—UK Household Longitudinal Study from 1996 to 2014 shows that the ranking of the satisfaction domains is group-based suggesting a “keeping up with the Joneses” effect linked to the housing bubble.
... The group of new approaches of measuring development investments include measurement of human happiness and well-being (Delhey and Kroll 2013), and life satisfaction in general, wherein research studies show that the level of life satisfaction is often not directly correlated to income level (Deaton 2008). For example, a study of satisfaction in the Russian Federation showed that changes in real household incomes explained only 10% of the total change in reported life satisfaction (Frijters et al. 2006). ...
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Sustainability analysis practice has so far proved that measurement of the level of sustainable development (SD) is associated with a large number of methodological difficulties and limitations, related mainly to the selection of indicators, data processing and interpretation of the results. This study is based on an assumption that SD should be measured in ways that depend on the level of development of the country, i.e., it is highly recommended to develop separate sets of indicators to be used for highly developed, medium-developed and poor countries. To that end, we carried out the study on a sample of 13 Southeast European (SEE) countries, and Germany and the Russian Federation for comparison—which are at different levels of development and overall political and socio-economic ambients. The research includes analysis by three different approaches to SD, each based on different sets of indicators: a “GDP approach” which is traditional, and in which economic and GDP-based indicators hold the dominant role; a “Beyond-GDP approach” that reduces the use of economic indicators while increasing the share of social indicators and those based on natural resources; and an “SDG-based approach” that is mainly using indicators of quality of life as defined by the United Nations (UN) SDG. The analysis was performed using the method of composite indicators. Groups of 20 indicators were selected according to their suitability to each of the 3 above-described approaches. The study objective leads to examining ways for measuring development, to suggest new ones, recommend approaches to sustainability planning for the considered SEE countries and beyond, to contribute to the analysis methodology (by assessing usability and reliability of certain indicators and of linkages between them), as well as to rank the countries’ levels of SD under these approaches. Some of the main conclusions are: (a) the indicators having the highest potential impact on the level of SD were foreign direct investments, public debt, energy imports, total natural resources rents, terrestrial and marine protected areas, vulnerable employment, and the Corruption Index; (b) use of the Inclusive Wealth Index is encouraged, so it is important to advance proper methodologies for its measurement; (c) Slovenia and Hungary were the highest-ranked SEE countries under all three approaches, just under Germany; and (d) the ranking order under the SDG-based approach could be used to identify the prioritization of development effort and funding that countries should apply and receive for meeting the SDG. Recommendations for further sustainability measurement were made based on the study’s findings.
... With few exceptions (Blanchflower and Oswald 2008;Deaton 2008;Realo and Dobewall 2011;Steptoe et al. 2015), studies of subjective well-being in the ECA region have not focused on an in-depth analysis of the interdependence between this variable and age. Rather, well-being regressions in most studies use age only as a potential covariate that is controlled when examining the association between wellbeing and such aspects as income (Frijters et al. 2006), the transition process (Hayo 2007), and/or the correlations among different subjective welfare measures (Cojocaru and Diagne 2015). In contrast to Deaton (2008) and Steptoe et al. (2015), these ECA studies consistently find a U-shaped pattern across the region, although they differ in both the way that well-being is defined 3 and the precise shape and location of the minimum. ...
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Using data from the Integrated Values Survey (IVS), the Life in Transition Survey (LiTS), and the Russia Longitudinal Monitoring Survey (RLMS), we analyse the relation between age and subjective well-being in the World Bank’s Europe and Central Asia (ECA) region and compare it to that in Western Europe. Although our results generally confirm previous studies’ findings of a U-shaped relation between subjective well-being and age for most of the lifecycle, we also find that well-being in ECA declines again after the 70s, giving rise to an S-shape relation across the entire lifespan. When controlling for socio-demographic characteristics, this pattern generally remains robust for most of our cross-sectional and panel analyses. Hence, despite significant heterogeneity in the pattern of well-being across the lifespan within the ECA region, we do not observe high levels of cross-country or cross-cohort variation.
... There are numerous empirical studies indicating income is a predictor of subjective well-being, especially for the poor people (Frijters, Shields, & Haisken-DeNew, 2004a;2004b;Frijters, Geishecker, Haisken-DeNew, & Shields 2006;Ferrer-i-Carbonell & Frijters, 2004;Ferrer-i-Carbonell, 2005). Existing literature suggests that poverty is negatively associated with well-being. ...
... Job satisfaction among Russian workers has been studied in papers such as Linz (2003) and Linz and Semykina (2012), both based on cross-sectional data, and Senik (2004), based on panel data. Frijters et al. (2006) focus on life satisfaction in Russia. All the above-mentioned studies pooled workers of all ages in the data, maintaining constant marginal effects across young and adult workers. ...
... He claims that it is due to the increased dissatisfaction with job, health and family life, but does not take into account that the high life satisfaction in early 90s could have a very specific regional explanation, i.e. political transition from a totalitarian to a democratic system, which could have significantly risen the levels of "normal" life satisfaction. Several other studies were devoted to a single country analysis in the region (Blanchflower, Oswald, 2001;Graham, Pettinato, 2002;Eggers et al., 2006;Andren, Martinsson, 2006;Frijters et al., 2006). ...
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In the paper, relation between GDP and subjective well-being, expressed as personal life satisfaction is analyzed. On the basis of the European Union data from 2000 to 2009, the so-called Easterlin’s paradox, which claims that life satisfaction stays flat in face of the increasing wealth of nations, is tested. The test is carried out using aggregated country level data on life satisfaction from a Standard Eurobarometer survey and GDP per capita data. Both the cross-country correlation and the within-country trends’ regression analyses show that the GDP level is positively related to the level of life satisfaction. Although the relation is particularly strongly expressed in Eastern European countries, it also stays positive in many more prosperous EU countries. Nevertheless, further studies on factors influencing the shape of relation are necessary to explain exceptions from the relation. The authors also suggest a possible necessity to find more sensitive indicators of life satisfaction to measure it more accurately in the future.
... A lot of this could be attributed to an ever improving economic environment and much greater social mobility. 38 In broad brushstrokes, it could be said that Brother depicted a likable young man, forced by social and political circumstance to kill bad people. In so doing, Balabanov especially accented his character's anti-Semitism, racist attitudes and dislike of American (and Western) culture. ...
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Aleksei Balabanov, Sergei Sel’ianov and their production company CTB played an important role in the cultivation and propagation of the bandit film cycle in Russian cinema. In as much, Brother (1997) and Dead Man’s Bluff (2005), act as bookends for this productive cycle and refract the Russian bandit cultural mythos. As the political and social situation in Russia evolved, so too did the films that glamorized and refracted this period of lawlessness. By placing Dead Man’s Bluff within the context of the bandit cycle, it is then possible to interpret the film as a postmodern pastiche in which Balabanov critiques and parodies the films that he and CTB popularized – once again providing a cinematic auto-citation, for which Balabanov was so well-known.
... Several other studies have focused on the dramatic changes around the fall of the Soviet Union and Berlin Wall (Frijters, Geishecker, Haisken-DeNew, & Shields, 2006;Frijters, Haisken-DeNew, & Shields, 2004a, 2004b. The transitions in Russia and Germany were by no means limited to changes in income. ...
... However, recent analysis in a range of cross-country and within country data almost always finds a significant association between income and subjective well-being measures (Frijters et al., 2004;Giovanis, 2014). Frijters et al. (2004) found that the increase in peoples' incomes in East Germany led to large life satisfaction gains in the decade following the Reunification, while Frijters et al. (2006) found that the large swings in life satisfaction observed in post-transition Russia can be partially explained by variations in income. However, there are many exceptions, such as the study by Clark and Oswald (1994), who found an insignificant relationship between the General Health Questionnaire (GHQ), which is a mental-psychological measure, and personal income in the BHPS dataset. ...
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The purpose of the paper is to test empirically the relationship between happiness, life satisfaction and income in Great Britain. The methodology followed is panel smoothing transition regression (PSTR) models using the British Household Panel Survey (BHPS). The data period examined in the current study covers the period 1991–2009. Regarding the logistic PSTR model the findings show that in the linear regime the association between household income, happiness and life satisfaction is insignificant. After some point the income has positive and significant effects on both subjective well-being measures. In the linear regime of the exponential PSTR model the relationship between income and the happiness is positive; however after a specific level of income the association becomes negative. On the other hand, the exponential PSTR model shows that the positive association between income and life satisfaction holds even for higher income levels. The originality of the paper is that panel smoothing transition regression (PSTR) models based on micro-level household data have not been employed before, examining the nonlinear relationship between income happiness and life satisfaction. Both logistic and exponential PSTR models are useful.
... By considering the demand for redistribution between the US and European regions through the intensity of income inequality on individual welfare, the discussion of validity with the welfare question seems subjective, due to the use of real-time welfare measures and experience sampling. So far, the promotion of the concept of a national welfare index to complement economic recovery with government strategies and programs in a number of countries is an important concern (Frijters et al., 2006;Kahneman & Krueger, 2006). ...
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This paper examines the effects of demographic pressure, happiness, and a human development index on labor force and economic growth in Romania for the period 2013-2019. Using path analysis, we developed two models, one exploring direct effects and the other indirect effects. Calculations in the models used time-series data obtained from annual reports. The paper documents six important findings, including that the variables demographic pressure, happiness, and the human development index support economic growth significantly. Moreover, the human development index and labor force also play an important and significant role in economic growth, but the human development index is the single most striking variable from our hypothesis test; it is shown that this index also has a significant effect on economic growth through the labor force. The evidence offers insights to stakeholders that emphasis needs to be placed on demographic pressure and happiness so that they can play a real role in the success of the population's welfare.
... 2 e impact of income and other economic characteristics has been a classical topic in the study of the economics of happiness. Several works show that people with larger income tend to report greater evaluative well-being (Diener et al., 1993;Diener and Biswas-Diener, 2002;Frijters et al., 2006;Veenhoven and Hagerty, 2006;Gardner and Oswald, 2007;Deaton, 2008). It is also commonly accepted that the relationship between income and evaluative well-being is best described as concave (Kahneman and Deaton, 2010). ...
Article
Is there a happiness premium for working in the public sector? We empirically explore this question using a large sample of about 15,000 Italian employees, from 2004 to 2016. We find that happiness increases with economic conditions, defined as either wealth, job salary, total income or as a factor combining these three pieces of information. Moreover, public employees are on average happier than private employees. This effect, however, holds only for individuals in relatively more deprived economic conditions. For better off individuals, there is no difference in happiness between public and private employees. We conclude that there is a happiness premium for working in the public sector, but only among individuals living in low economic conditions. In particular, their happiness gain is able to compensate the gap these individuals face with respect to private employees with medium economic conditions. Our findings add to the relatively scant empirical literature on psychological well-being and public employment.
... 12 Frijters et al., 2006RLMS-HSE 1995 Changes in real incomes were important in explaining the swings in life satisfaction in the post-transition period. Life satisfaction rises significantly in response to moving from unemployment to employment, and falls in response to wage arrears, poor health and marital dissolution. ...
... 12 Frijters et al., 2006RLMS-HSE 1995 Changes in real incomes were important in explaining the swings in life satisfaction in the post-transition period. Life satisfaction rises significantly in response to moving from unemployment to employment, and falls in response to wage arrears, poor health and marital dissolution. ...
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Hardly any recent study exists that broadly reviews poverty trends over time for Russia. Analyzing the Russian Longitudinal Monitoring Surveys between 1994 and 2019, we offer an updated review of poverty trends and dynamics for the country over the past quarter of century. We find that poverty has been steadily decreasing, with most of the poor having a transient rather than a chronic nature. The bottom 20 percent of the income distribution averages an annual growth rate of 5 percent, which compares favorably with that of 3.3 percent for the whole population. Income growth, particularly the shares that are attributed to labor incomes and public transfers, have important roles in reducing poverty. Our findings are relevant to poverty and social protection policies. JEL: C15, D31, I31, O10, O57
... 2 e impact of income and other economic characteristics has been a classical topic in the study of the economics of happiness. Several works show that people with larger income tend to report greater evaluative well-being (Diener et al., 1993;Diener and Biswas-Diener, 2002;Frijters et al., 2006;Veenhoven and Hagerty, 2006;Gardner and Oswald, 2007;Deaton, 2008). It is also commonly accepted that the relationship between income and evaluative well-being is best described as concave (Kahneman and Deaton, 2010). ...
... Studies indicate that while neoliberal restructuring has led to improvements in disposable income of certain segments of the population, it is also associated with new clusters of people living under extreme conditions of poverty (Ferguson 2007;Lovering and Turkmen 2011). Furthermore, as many developing countries are characterized by high unemployment and inflation rates, even the economic winners may be reluctant to assess their life satisfaction highly (Frijters et al. 2006;Graham and Pettinato 2001;Kenny 2005). Some evidence indicates that income can moderate the relationship between the perceived value of global brands and importance of faith and QOL. ...
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Recently, scholars have been calling attention to the macro-social and institutional structures shaping development and welfare. In this study we offer a socio-temporally situated understanding of quality of life (QOL) in a developing country setting and investigate the effects of macro structures on consumer well-being. Specifically, we focus on neoliberal development (led by the business sector, rather than led or directed by the government) and examine how a neoliberal transformation of the marketplace affects consumers’ QOL perceptions. The context of our research is Turkey, a developing country which has been an avid follower of neoliberal policies since the 1990s. We focus on three key macro-social developments that have been shaping Turkish society in the past decades–globalization, religion, and economic growth–and seek to understand how these forces influence consumers’ satisfaction with life. Our study contributes to the literature on development and QOL by first, showing the moderating effect of income, and second, introducing faith and global brands as important variables in conceptualizing QOL.
... Studies in developed countries have exploited variation in wealth or income induced by lotteries (Brickman et al., 1978;Lindahl, 2005;Gardner and Oswald, 2007;Kuhn et al., 2011;Apouey and Clark, 2015), tax rebates (Lachowska, 2017), stock price fluctuations (Schwandt, 2018), or within-person changes over time (e.g. Frijters et al., 2004Frijters et al., , 2006. Most studies conclude effects are positive, but the effect sizes vary substantially in magnitude. ...
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We surveyed a large sample of Swedish lottery players about their psychological well-being 5–22 years after a major lottery event and analysed the data following pre-registered procedures. Relative to matched controls, large-prize winners experience sustained increases in overall life satisfaction that persist for over a decade and show no evidence of dissipating over time. The estimated treatment effects on happiness and mental health are significantly smaller. Follow-up analyses of domain-specific aspects of life satisfaction implicate financial life satisfaction as an important mediator for the long-run increase in overall life satisfaction.
... For example,Gardner and Oswald (2007) use lottery winnings as an exogenous shock to income whileFrijters et al. (2004a) andFrijters et al. (2004b) rely on German reunification as source of exogenous variation in income levels. Similarly,Frijters et al. (2006) exploit the changes in income in Russia following the fall of the iron curtain as a quasi-experiment to estimate the causal effect of income on life satisfaction. Luttmer ...
Thesis
In this thesis, I demonstrate how measures of subjective well-being can be used in economics as quantitative approximations of individual welfare for policy evaluation. I start by showing how subjective well-being is typically gauged. Next, I discuss whether these measures are valid and reliable and draw attention to the potential caveats that come along when empirically analyzing such data. Subsequently, I present the main dataset used in this thesis as well as selected economic and noneconomic determinants of subjective well-being. The building blocks discussed so far set the stage for the main part of my thesis, consisting of three evaluations of public policies using subjective well-being data. In the first investigation, I apply subjective well-being data to analyze whether agency contracts are less favorable than regular working contracts. My first contribution to the literature is that I differentiate whether agency workers are employed on fixed-term or permanent working contracts. I find that this differentiation does not explain why agency workers are less satisfied than workers with regular working contracts. My second contribution to the literature is that I provide evidence that the well-being difference can be explained by reference point changes of agency workers who previously were regular employees. In a second evaluation, I use subjective well-being data to investigate whether the alleged benefits of private as opposed to public health insurance in Germany actually transfer into better health. I contribute to the literature by focusing on adolescents to control for selection and to account for differences in health-conscious behavior. I find that privately and publicly insured individuals do not differ in health, which contrasts with previous research. In my third investigation, I rely on subjective well-being data gathered around the time of the implementation of a sales ban on alcohol at off-premise outlets in the German federal state of Baden-Wuerttemberg to analyze its well-being consequences. I contribute to the literature by providing the first empirical investigation of the well-being effect of alcohol control policies in the setting of a natural experiment. I find that well-being decreased significantly after the implementation of the ban, which is in line with the rational addiction model. I end the thesis with a discussion of what the findings of subjective well-being research entail for public policy.
... Negative feelings that generally characterize envy have been discussed in the conceptual framework of relative deprivation, which is a psychological outcome of the observed difference between the desired situation and the real condition of the person (Gurr 1970;Runciman 1966;Sztompka 1993). According to the theory of changes, envy is an emotion that supposedly grows when income inequality increases or norms concerning decent living standards are changing; and this is a feeling that can cause life dissatisfaction irrespective of the level of individual incomes (Clark and Senik 2010;Frijters et al. 2006;Senik 2008;Verwiebe and Wegener 2000). In consumer behavior research, envy is interpreted as a component of "materialism," which is the basic enduring belief that it is important to own material possessions in order to feel happy and successful (Ahuvia and Wong 1995;Belk 1984 andRichins and Dawson 1992). ...
... Especially in the earlier phases of research on the effect of income on subjective wellbeing, the vast majority of studies did not consider the income endogeneity issue, mainly due to the difficulties of performing a randomized experiment, as well as finding appropriate instruments in secondary survey data. To date, only a couple of studies have used exogenous sources of income increase, such as winning the lottery Oswald 2002, 2007;Lindahl 2005;Apouey and Clark 2015) or institutional change (Frijters et al. 2004(Frijters et al. , 2006 to mitigate the income endogeneity issue. The studies found a positive effect of income on subjective well-being, although even these studies have their limitations due to small effective sample sizes and the fact that they cannot control for time-varying omitted variables. ...
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In this article, we study the causal effects of two economic standing measures on the subjective well-being of the elderly, as well as the moderating effects of distinct welfare regimes on these relationships. For our analysis, we classify countries into the following welfare regimes: Conservative, Social-democratic, Mediterranean, and Post-socialist. We address the income endogeneity issue by utilizing the panel structure of our data and instrumenting for income. Our findings show that the significance and strength of the effects of both economic standing measures on life satisfaction are moderated by the institutional context or welfare regime type, which we support by providing several robustness checks. Finally, we make a deeper inquiry into the heterogeneity of the countries classified. After controlling for endogeneity, our results indicate that the relationship between economic standing and life satisfaction is mostly driven by individual countries, which suggests caution when studying the effect of economic standing on subjective well-being.
... as employment in not-for-profit as compared to profit organisations (Benz, 2005). Papers have also examined broader environmental influences on wellbeing such as civil conflict (Welsch, 2008), German reunification , Russian economic transition (Frijters et al 2006), drought (Carroll et al 2009) and government expenditures generally (Bjornskov et al 2007;Ram, 2009) and in transition economies (Perovic´and Golem, forthcoming) (for an overview of the literature, see Frey and Stutzer, 2002). ...
... Since Easterlin (1974), studies that use micro data (panel or cross-sectional) have consistently found a strong positive effect of personal income on happiness, or money buys happiness (e.g., Winkelmann and Winkelmann 1998; Blanchflower and Oswald 2004;Ferreri-Carbonell and Frijters 2004;Senik 2004;Stutzer 2004;Frijters et al. 2004aFrijters et al. , 2004bFrijters et al. , 2006Ferrer-i-Carbonell 2005;Caporale et al. 2009;Powdthavee 2010). Meanwhile, time series data from a variety of countries including both developed and developing nations, as well as economies in transition, have confirmed that economic growth does not improve happiness (e.g., Easterlin 1995;Oswald 1997;Blanchflower and Oswald 2004;Easterlin 2009;Easterlin 1 Also, very few studies have used Taiwan PSFD to examine happiness. ...
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This is the first article examining the causal impact of mandatory extended primary schooling on happiness (sense of well-being) of young adults. We rely on a law change that raised compulsory schooling from 5 to 8 years in Turkey to address the endogeneity of education to happiness. Our study shows that, for females, earning at least a middle school diploma increases the likelihood of being happy and the probability of being satisfied with various life domains. Descriptive tests suggest that being hopeful about one’s own future well-being partly explains the relationship between women’s schooling and happiness. For males, although relatively imprecisely estimated, we find evidence that earning at least a middle school degree results in a decline in subjective well-being. Supplemental analysis develops evidence consistent with the view that an imbalance between aspirations and attainments, flowing from extended primary schooling, may be the reason behind this counterintuitive finding among men.
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The purpose of this study is to examine the determinants of subjective well-being and subjective health of households in Turkey by considering the interaction between these two variables. Micro data set of Survey of Income and Living Conditions (SILC) held by TurkStat for the period of 2017 is used in this study. The answers of the questions on “the ability to make ends meet with total household income” and “the general health status of household head” are defined as “subjective economic well-being” and “subjective health” variables, respectively, which denote the dependent variables of the study. Because of the ordered structure of dependent variables, bivariate ordered probit model is used to determine the effects of independent variables on household head’s well-being status and health status in order to focus the relationship between these two dependent variables. According to the findings obtained from the study, the higher the education level of the household head, the better the subjective health perception of the household head. In addition, the status of the household head as unemployed or divorced negatively affects the subjective economic well-being of the household head. Household income is the most important variable affecting both the subjective economic well-being and subjective health of the household head. As a result, although the determinants of subjective economic well-being and subjective health of the household head differ, there exists a relationship between these two subjective variables.
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Chapter
Based on economic and sociological research, this chapter examines (in)stability of behavioural patterns across developed countries and countries in transition. At first it introduces the notion of subjective well-being (SWB) and its components. Then it turns to the existing SWB gap between developed countries and countries in transition and defines the socio-demographic characteristics of the winners of transition. Further on, the focus moves to the role of economic environment and labour market conditions. Finally, we consider the role of societal and institutional characteristics, which are increasingly recognized as being more important than economic ones.
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Standard measures of multidimensional inequality (implicitly) assume common preferences for all individuals, and hence are not sensitive to preference heterogeneity among members of society. In this paper, we measure the inequality of the distribution of equivalent incomes, which is a preference-sensitive multidimensional wellbeing measure. To quantify the contribution of preference heterogeneity to wellbeing inequality, we use a decomposition method that calculates wellbeing inequality in different counterfactual distributions. We focus on four sources of wellbeing inequality: the correlation between outcomes and preferences, the preference heterogeneity, the correlation between the outcome dimensions, and the inequality within each of the outcome dimensions. We find that preference heterogeneity accounts for a considerable part of overall wellbeing inequality in Russia for the period 1995–2005.
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This article is focused on the analysis of the determinants of job satisfaction of Russian workers through the estimation of ordered logit models with individual fixed effects on a panel data set extracted from the Russian Longitudinal Monitoring Survey. The real wage results positively associated with job satisfaction on all samples considered, after controlling for several time-varying controls aimed at picking up time-varying human capital, preferences, and non-instantaneous equilibrium adjustments. As long as the included controls capture all the heterogeneous trends in individual wages, we may interpret this result as a possible failure of the theory of compensating wage differentials in the Russian labour market.
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Do better material conditions improve well-being and mental health? Or does any positive relationship merely reflect that well-being promotes economic success? We compare winners and losers from a large Ethiopian housing lottery in a preregistered analysis. Winners gain access to better housing, experience a substantial increase in wealth, and report higher levels of overall life satisfaction and lower levels of financial distress. However, we find no average effects of winning on psychological distress. Our results suggest that not all aspects of well-being and mental health are equally sensitive to economic conditions.
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Purpose of research. The work is devoted to the study of socio-economic differentiation in Russia and its impact on the financial situation of the population, its subjective perception, as well as on the psychosocial well-being of individuals. To achieve this goal, the following tasks are to be solved: clustering of regions of the Russian Federation, based on socio-economic indexes; studying the interrelation between the level of socio-economic development of the region and the financial situation of residents; studying the interrelation between the level of socio-economic development of the region and the subjective perception by individuals of their financial situation; studying the interrelation between the level of socio-economic development of the region and the psychosocial well-being of individuals. Materials and methods. The information base of the study includes: regional data, published by the State Committee on Statistics in the digest “Russian Federation Regions”, household survey data “Russian monitoring of the economic situation and health of the population HSE” (RLMS-HSE). Russia Longitudinal Monitoring Survey of Higher School of Economics is a representative socio-economic survey of Russian households, in which the content structure of the used questionnaires meets the standard, adopted in the world practice. The study uses the following methods: cluster analysis (k-means method), statistical groupings, Kruskal-Wallis and Mann-Whitney statistical tests. Results . The study showed that: – the Russian Federation regions are very heterogeneous in terms of socio-economic development – specific indicators for the regions may differ significantly. It should be taken into account in the study of any social and economic problems, including the problems of income inequality; – Russian regions can be divided into four clusters. Analysis of the petal diagram of clusters made it possible to reveal their features and give them generalized characteristics. The first cluster includes regions with very high investment, fixed assets and GRP per capita. The second cluster includes regions with an average level of development. The third cluster includes regions with a high level of development. The fourth cluster includes depressive regions; – There is a clear correlation between the level of socio-economic development of the region of residence and the objective financial situation of residents: the incomes of respondents, living in the leading regions are significantly higher than the incomes of respondents of other clusters; the incomes of respondents, living in depressed regions are lower than the incomes of respondents of other clusters; – Individuals’ perception of their financial situation and their concerns are practically the same in all clusters and do not correlate with the level of socio-economic development of the region of residence; – The level of economic development of the region of residence does not have a significant direct impact on psychosocial well-being – individuals from different clusters feel almost equally satisfied with life and almost equally happy.
Chapter
This paper casts light upon various approaches to assessment of poverty levels including absolute, relative and subjective ones, as well as their strengths and drawbacks. This work studies subjective poverty levels in the Russian Federation, their region-related differences and dependence on the social well-being factors. The study’s informational background is the data obtained from regions of the Russian Federation and the statistics based on the results of the opinion polls held by the Russian Longitudinal Monitoring Survey of HSE. In order to study the region-related disparity in the levels of subjective poverty, regions of the Russian Federation have been clustered, using k-means method, based on a number of socioeconomic indices. As a result, three regional clusters have been shaped: the leader regions, the depressed regions and the medium-level development regions. Region-related differences in the levels of subjective poverty and psychosocial well-being are studied using such statistical methods as multi-way tables and statistical tests for determination of significance of the differences across the groups. Comparative study of the subjective poverty levels in the abovementioned clusters have shown that the difference in such levels is quite insignificant, while the respondents from all three clusters attest to fairly positive social well-being.
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This paper investigates the correlates of life satisfaction inequality in Russia between 2010 and 2018, employing Russian Longitudinal Monitoring Survey (RLMS-HSE). Ordinary Least Squares (OLS) regression results revealed that the major correlates of life satisfaction inequality in Russia are unemployment, being out of labor force, higher education and marital status. We confirm inequality-decreasing feature of income, implying that life satisfaction inequality decreases with increasing individual’s income. Moreover, feeling oneself relatively rich associated with lower life satisfaction inequality. Our study reveals income and gender differences in correlates of life satisfaction inequality. Such regional indicators as gross regional product and population are related to life satisfaction inequality in Russia.
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The article provides an analytical overview of the peculiarities of the international and Russian tradition of studying overlapping structures describing happiness, subjective well-being, quality of life and satisfaction. The semantic content of such constructions and the peculiarities of their use in empirical research are studied. The most common and studied determinants of subjective well-being are described. Existing Russian and international databases that can serve as sources of well-being analysis in the time and cross-country space are considered. A semantic analysis of the concept of "happiness" as the closest and most commonly used synonym for the term "subjective well-being" is conducted. The discussion questions of the relationship of theoretical constructs describing the concept of subjective well-being are discussed in detail. A characterisation of the extent to which the existing needs of an individual are met has been proposed as a basis for developing similar structures, where it is important to take into account the individual specificity and level character of the needs themselves. It has been shown that the concept of subjective well-being is adequately described by the parameter of need satisfaction, the indicator of which is positive emotions. A model of subjective well-being is considered, which takes into account the difference between the hedonistic component characterized by a measure of satisfaction with universal basic needs determined by material and other resources, and the eudemonistic component characterising success in achieving individual meaningful life goals. The article provides an analysis of the fact that a person's well-being is determined both through an assessment or self-assessment of his or her social status and situation, his or her ideas about the possibility and feasibility of achieving the desired goal. On this basis, a two-level model of subjective well-being is proposed, distinguishing between an affective component, such as an assessment of an individual's emotional balance at the time of measurement and a cognitive component, which characterises the assessment of quality of life in general, the degree of subjectivity and reasonableness in achieving a person's life goals.
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The initial years of transition in the Russian federation have been characterised by relatively smaller falls in employment than observed in other reform-orientated countries of Eastern Europe. We show that for many Russian workers, the dominant form of labour market adjustment is instead the delayed receipt of wages. There are large regional variations in the incidence of wage arrears. Workers in the metropolitan centre are significantly less affected by delayed and incomplete wage payments than workers in the provinces. There is less evidence that individual characteristics contribute much toward the incidence of wage arrears, though unobserved heterogeneity has some role to play. Wage arrears are found across the skill distribution. As with the incidence of unemployment, however, there is evidence that the persistence of arrears is concentrated on a subset of the working population. We show that workers can only exercise the exit option of a job quit from a firm paying wages in arrears if the outside labour market is sufficiently dynamic.
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This paper attempts to estimate the impact of wage arrears on subjective well being, as measured by the RLMS (Russian Longitudinal Monitoring Survey). This latter is a comprehensive survey, conducted from 1992 up to 1998, on a representative sample of Russian households and individuals. The results are unambiguous: working with wage a r - rears implies a clear fall in satisfaction. We are able to calculate the shadow price of wage arrears, that is the increase in wages which would place an individual with wage arrears on the same indifference curve as an individual without such arrears. Another result, on the face of it more puzzling, is that the level of satisfaction provided by a job with ar- rears is lower than that provided by inactivity (although higher than that provided by unemployment). We suggest some explanations which we will test in further work. Sub-regressions show that the psychologi- cal impact of wage arrears is greater for men and less well-educated workers, and smaller for women and better-educated workers.
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Well-being research has supported the common sense view that income, health, and other factors affect happiness. We use panel data from Russia to assess the reverse causation — that happiness itself affects income, health, and other factors. We find that people who had higher “residual happiness” in 1995 – people who were happier after correcting for the usual determinants of well-being – made more money and were in better health in a survey 5 years later. Psychologists attribute a large part of well-being to factors such as self-esteem and optimism. The same factors appear to influence individuals’ wealth and health.
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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.
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This paper investigates the patterns and determinants of life satisfaction in Germany following reunification. We implement a new fixed-effect estimator for ordinal life satisfaction in the German Socio-Economic Panel and find negative effects on life satisfaction from being recently fired, losing a spouse through either death or separation, and time spent in hospital, while we find strong positive effects from income and marriage. Using a new causal decomposition technique, we find that East Germans experienced a continued improvement in life satisfaction to which increased household incomes contributed around 12 percent. Most of the improvement is explained by better average circumstances, such as greater political freedom. For West Germans, we find little change in average life satisfaction over this period.
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The Russian Federation has undergone some drastic economic, social-cultural, and political changes since 1989. The income of nearly half of the population has sunk below the poverty line, which has had an enormous impact on their emotional life. In this study, the relationship between income and satisfaction in Russia was examined. Three theories – need, comparison, and personality theory – were considered. Data were drawn from the first three waves of the Russet panel study (1993–1995). Russians were a little more satisfied with their income and life when they had a higher income. A positive change in income caused an increase in income-satisfaction over a one-year period. Results also showed that there was a reciprocal relationship between income-satisfaction and life satisfaction, indicating that in addition to bottom-up effects, top-down mechanisms were also at work: life satisfaction is partly a sum of domain satisfactions, but it also reflects a more trait-like character. Furthermore, within comparison theory, social comparison had the largest effect on income-satisfaction, closely followed by income needed (person-environment fit theory), and income deserved (equity theory) with the smallest effect. The need effect of income on income-satisfaction became non-significant when controlled for these three comparison mechanisms. Correction for measurement error of relationships between the endogenous variables resulted in overall stronger effects.
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According to adaptation theory, individuals react to events but quickly adapt back to baseline levels of subjective well-being. To test this idea, the authors used data from a 15-year longitudinal study of over 24.000 individuals to examine the effects of marital transitions on life satisfaction. On average, individuals reacted to events and then adapted back toward baseline levels. However, there were substantial individual differences in this tendency. Individuals who initially reacted strongly were still far from baseline years later, and many people exhibited trajectories that were in the opposite direction to that predicted by adaptation theory. Thus, marital transitions can be associated with long-lasting changes in satisfaction, but these changes can be overlooked when only average trends are examined.
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I present data and assess the first twelve years of the transition from plan to market. Transformations have taken place, but the income gap between the transition and advanced economies has widened. Transition countries further east have performed worse than those further west, but policies matter. All countries carried out quickly Type I reforms, such as macroeconomic stabilization, price liberalization, small-scale privatization, and breakup of state-owned enterprises. They differed in Type II reforms, such as large-scale privatization and development of banking and legal systems. Countries that developed a functioning legal framework and corporate governance have performed better than others.
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In this paper we investigate how life satisfaction (or happiness) is affected by a substantial increase in real income. Our context is East Germany in the decade following reunification, and we implement a new fixed-effect estimator for ordinal life satisfaction and develop a decomposition approach that accounts for new entrants and panel attrition. Using data from the German Socio-Economic Panel we find that average life satisfaction in East Germany increased by around 20% between 1991 and 2001, leading to a clear convergence with West Germany. Importantly, increased real household incomes in East Germany accounted for around 35-40% of this increase, which corresponds to the economists' view that money surely matters.
Book
This was the title of a workshop (and its short proceedings) that resulted in the book "Well-being: Foundations of hedonic psychology" (Russel-Sage, 1999). Please refer to the published version.
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Institutional factors in the form of direct democracy (via initiatives and referenda) and federal structure (local autonomy) systematically and sizeably raise self-reported individual well-being in a cross-regional econometric analysis. This positive effect can be attributed to political outcomes closer to voters' preferences, as well as to the procedural utility of political participation possibilities. Moreover, the results of previous microeconometric well-being functions for other countries are generally supported. Unemployment has a strongly depressing effect on happiness. A higher income level raises happiness, however, only to a small extent.
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We propose a micro-econometric evaluation of the relation between life satisfaction and income distribution, using a balanced panel survey of the Russian population, Russian longitudinal monitoring survey (RLMS), running from 1994 to 2000, covering 4685 individuals. We show that in the context of the very volatile Russian environment, Hirschman’s [Q. J. Econ. 87 (1973) 544] “tunnel effect” conjecture seems to be confirmed: variables reflecting income distribution do not influence satisfaction through social comparisons; individuals rather seem to use their informational content in order to form their expectations. The reference group's income thereby exerts a positive influence on individual satisfaction, which contrasts with other studies on the subject. Inequality indices do not affect individual welfare.
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This paper models the relationship between income and reported well-being using latent class techniques applied to panel data from twelve European countries. Introducing both intercept and slope heterogeneity into this relationship, we strongly reject the hypothesis that individuals transform income into well-being in the same way. We show that both individual characteristics and country of residence are strong predictors of the four classes we identify. We expect that differences in the marginal effect of income on well-being across classes will be reflected in both behaviour and preferences for redistribution.
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This paper analyzes the economic situation of former Communist party members in post-Soviet Russia. On the basis of the Russian Socio-Economic Transition Panel, we are able to identify members of the Communist party prior to transition so that we can assess their relative economic performance between 1993 and 1999. We find a significant wage premium associated with former membership in the Soviet Communist party during the period from 1993 to 1999. After addressing non-random selection into the Communist party using an instrumental variables approach, we demonstrate that the overall Communist wage premium can be attributed to positive unobservable characteristics of former party members. Journal of Comparative Economics32 (4) (2004) 700–719.
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Recent work suggests that a person’s subjective well-being (SWB) depends to a large degree on relative-income. Focusing on the underlying identification, this paper makes four contributions to this literature: it describes the aggregation problem with past studies, implements an estimation strategy to overcome this problem, finds micro-level evidence in support of the hypothesis that relative-income does matter in individual assessments of SWB, and uses cross-section estimates to replicate the aggregate time-series. The evidence further indicates that relative-income effects may be smaller at low income levels. The results are obtained from ordered probit techniques and the general social survey (GSS).
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Inherent in wage bargaining models and in models of job search is the assumption that utility is related to employment status. It is thus postulated that unemployment is associated with lower utility than employment, or that unemployment is moderated by manpower programs and unemployment benefits. Yet despite the centrality of such assumptions, empirical evidence on these issues is rarely presented. This paper presents such evidence, analyzing differences in subjective well-being among youth relating to employment, unemployment, participation in manpower programs and receipt of unemployment benefits. The results show that, relative to employment, unemployment has an unambiguously negative effect on well-being. Manpower programs seem to occupy an intermediate position. They are clearly better than unemployment and there are suggestions that they are worse than employment.
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Most of those Russian adults who feel that they are poor are not classified as such in the poverty statistics, and most of those who are classified as poor don't feel that way. We study the determinants of peoples’ perceptions of their economic welfare in an unusually rich socioeconomic survey. While income is a highly significant predictor, subjective economic welfare is influenced by many other factors including health, education, employment, assets, relative income in the area of residence and expectations about future welfare. Insights are obtained into how objective data should be weighted in assessing economic welfare.
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The hypothesis that individuals try to maximize their life-satisfaction is analyzed. The approach was to derive empirically testable predictions as to the relationships between intentions, actions, importance weights, and satisfaction levels that would be consistent with the hypothesis, and to test these predictions on a Russian and a German panel data set. The respondents investigated were more likely to intend to change those areas they are unsatisfied with in this period, were more likely to actually have changed those areas they were unsatisfied with in the last period, and tended to find the areas of their lives they were dissatisfied with less important. The relationships were not very strong though and were more reliable for the German data set than for the Russian data set. The findings therefore give only limited support to the hypothesis examined.
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Subjective expectations about future income changes are analyzed, using household panel data. The models used are extensions of existing binary choice panel data models to the case of ordered response. We consider static models with random and fixed individual effects. We also look at a dynamic random effects model which includes a measure for permanent and transitory income. We find that income change expectations strongly depend on realized income changes in the past: those whose income fell, are more pessimistic than others, while those whose income rose are more optimistic. Expected income changes are also significantly affected by employment status, family composition, permanent income, and past expectations. Expectations are then compared to the head of household’s ex post perception of the realized income change for the same period. The main finding is that rational expectations are rejected, and that in particular, households whose income has decreased in the past underestimate their future income growth.
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Using information from two complementary household survey data sets, we show that the dominant form of labor market adjustment in the Russian transition process has been the delayed receipt of wages. More than half the work force is experiencing some form of disruption of their pay. Wage arrears are found across the private, state, and budgetary sectors. Workers in the metropolitan center are less affected by delayed and incomplete wage payments than are workers in the provinces. There is less evidence that individual characteristics contribute much toward the incidence of wage arrears, but the persistence of arrears is concentrated on a subset of the working population. We show that workers can only exercise the exit option of a job quit from a firm not paying wages in full or on time if the outside labor market is sufficiently dynamic. J. Comp. Econom., December 1999, 27(4), pp. 595–617. Heriot-Watt University, Edinburgh EH14 4AS, United Kingdom, IZA, Bonn, Germany, and WDI, Ann Arbor, Michigan; Centre for Economic Performance, London School of Economics, London WC2AE 2AE, England, and Royal Holloway College, University of London, Egham, TW20 1TQ, England; School of Information Management and Systems, University of California, 102 South Hall, Berkeley, California 94720-4600.