Ada Ferrer-i-Carbonell

How Important is Methodology for the Estimates of the Determinants of Happiness

Psychologists and sociologists usually interpret happiness scores as cardinal and comparable across respondents, and thus run OLS regressions on happiness and changes in happiness. Economists usually assume only ordinality and have mainly used ordered latent response models, thereby not taking satisfactory account of fixed individual traits. We address this problem by developing a conditional estimator for the fixed-effect ordered logit model. We find that assuming ordinality or cardinality of happiness scores makes little difference, whilst allowing for fixed-effects does change results substantially. We call for more research into the determinants of the personality traits making up these fixed-effects.

The Anatomy of Subjective Well-Being

This paper contributes to the literature on subjective well-being (SWB) by taking into account different aspects of life, called domains, such as health, financial situation, job, leisure, housing, and environment. We postulate a two-layer model where individual total SWB depends on the different subjective domain satisfactions. A distinction is made between long-term and short-term effects. The individual domain satisfactions depend on objectively measurable variables, such as income. The model is estimated using a large German panel data set.

Alternative models of individual behaviour and implications for environmental policy

Abstract Most insights of environmental economics are in line with the standard neoclassical economic model of rational behaviour, formulated in terms of maximization of utility in general, or of profits in particular. The standard theory of environmental policy is a case in point. However, the maximization hypothesis and its methodological foundation have been criticized on many grounds related to a lack of either logical or empirical content. Moreover, over the years a great many alternative models of behaviour have been proposed. Both criticism and alternatives are surveyed here. Attention is devoted to relevant insights from the philosophy of science, the notion of methodological individualism, and other criticism. The alternative behavioural models include bounded rationality and ‘satisficing’, lexicographic preferences, habitual behaviour, incommensurability and multicriteria evaluation, and various models of behaviour under uncertainty. Major implications of the criticism and alternative models of individual behaviour for environmental policy theory are outlined.

Hidden Consequences of Success in Pediatrics: Parental Health-Related Quality of Life—Results From the Care Project

CONTEXT. The number of parents who care for a chronically ill child is increasing. Because of advances in medical care, parental caring tasks are changing. A detailed description of parental health-related quality of life will add to the understanding of the impact of caring for a chronically ill child. This will contribute to pediatric family care. OBJECTIVE. Our goal was to determine the health-related quality of life of parents of chronically ill children compared with parents of healthy schoolchildren. DESIGN, SETTING, AND PARTICIPANTS. A survey of 533 parents of children with chronic conditions (10 diagnosis groups, children aged 1–19 years, diagnosed >1 year ago, living at home) and 443 parents of schoolchildren was conducted between January 2006 and September 2007. Parents were approached through Emma Childrens Hospital (which has a tertiary referral and a regional function) and through parent associations. The comparison group included parents of healthy schoolchildren. Health-related quality of life was assessed with the TNO-AZL Questionnaire for Adults Health Related Quality of Life. MAIN OUTCOME MEASURE. Health-related quality of life measures gross and fine motor function, cognitive functioning, sleep, pain, social functioning, daily activities, sexuality, vitality, positive and depressive emotions, and aggressiveness. The health-related quality of life of the study group was compared with that of the comparison group, and effect sizes were estimated. The percentages of parents at risk for a low health-related quality of life were compared with the 25th percentile scores of the comparison group. RESULTS. Parents of chronically ill children had a significantly lower health-related quality of life. Subgroup analysis showed lower health-related quality of life on sleep, social functioning, daily activities, vitality, positive emotions, and depressive emotions in disease-specific groups. On average, 45% of the parents were at risk for health-related quality-of-life impairment. CONCLUSIONS. Parents of chronically ill children report a seriously lower health-related quality of life, which should receive attention and supportive care if necessary. A family-centered approach in pediatrics is recommended.

Income Satisfaction Inequality and Its Causes

In this paper, the concept of Income Satisfaction Inequality is operationalized on the basis of individual responses to an Income Satisfaction question posed in the German Socio-Economic Panel (GSOEP). Income satisfaction is the subjective analogue of the objective income concept. The paper introduces a method to decompose Income Satisfaction Inequality according to the contributions from variables such as income, education, and the number of children. Given the panel structure of the data, inequality may be attributed partly to permanent individual circumstances and partly to transitory changes. The paper shows that by far the largest part of the satisfaction inequality has to be ascribed to unobserved heterogeneity. Distinguishing between a structural and an unexplained part of inequality we find that income explains the largest part of structural Income Satisfaction Inequality together with household membership; for non-working individuals, the age distribution is very relevant as well.

Poverty in Russia

This paper is intended to shed light on the extent of poverty in the Russian Federation. We present estimates of poverty lines and poverty ratios derived from subjective questions used in a data collection for a large household panel (RUSSET). We estimate poverty using a subjective approach, where the level of the poverty line is derived using the opinion of the individual, rich or poor, on poverty. This approach differs from the objective approach to poverty, which defines poverty according to the opinion of experts. Three subjective poverty lines are presented: one the Financial Satisfaction Poverty Line, two the Leyden Poverty Line, and three the Subjective Well-Being Poverty Line. The first two poverty lines are based on subjective questions regarding income and economic welfare while the last concept focuses on satisfaction with life as a whole. The results obtained are compared with each other and with results derived using objective measures and official figures.

A Multidimensional Approach to Subjective Poverty

The concept of poverty is elusive. On the one hand, poverty is a politically and psychologically loaded concept. It has been the subject of novels and also of many scientific studies. On the other hand, there is no straightforward definition of the concept and no generally accepted method of measurement. This makes it difficult to use the concept of poverty in the political debate on poverty reduction, which after all requires quantitative data.

Financial Satisfaction and (in)formal Sector in a Transition Country

This paper examines the relationship between working in the formal or informal sector and self-reported individual financial satisfaction in a country in transition. It does so by allowing for individual heterogeneity in terms of perceived financial insecurity and tax morale. The empirical analysis uses a dataset for Albania, a country in transition. The method applied is the ‘self-administered questionnaire’, which combines personal contacts with written questionnaire. The results indicate that, for most individuals, working in the informal sector has negative effects on their self reported financial satisfaction. For some individuals, however, this effect is positive. The characteristic defining these two groups of individuals is their attitude towards the perceived financial insecurity related to not paying taxes. These findings have important implications, in particular for transition countries with large informal sectors. Given the involuntary participation in the informal sector in these countries, the majority of individuals working in this sector will remain financially dissatisfied as long as they have no other social safety net.

A Structural Model of Well-being: with an application to German Data

In this paper we attempt to explain individual, ordinally comparable,satisfaction levels. We postulate a simultaneous equation model where general satisfaction isexplained by exogenous shock and level variables, and by the values of the satisfactionswith respect to six distinct endogenous domains of life. Taking into account that thesesatisfactions were categoricallymeasured and allowing for individual effects, the model was estimatedon six consecutive waves of the German Socio-Economic Panel. The results are statistically verysignificant and plausible.The main conclusions of this paper are:given the fact thatwe get stable significant andintuitively interpretable results, the assumption of interpersonal(ordinal) comparability ofsatisfactions cannot be rejected on the grounds that it leads toinsignificant or implausible results;It is possible to explain satisfactions to a large extent byobjectively measurable variables;Domain Satisfactions are strongly interrelated because of commonexplanatory variables;General Satisfaction may be seen as an aggregate of the six domainsatisfactions.

Income Comparisons and Non-Cognitive Skills

People gain utility from occupying a higher ranked position in the income distribution of the reference group. This paper investigates whether these gains depend on an individual’s set of non-cognitive skills. Using the 2000-2008 waves of the German Socioeconomic Panel dataset (SOEP), a subjective question on Life Satisfaction, and three different sets of non-cognitive skills indicators, we find significant and robust differences across skills groups. People who are more neurotic, extravert and have low external locus of control and low negative reciprocity are more sensitive to their individual position in the economic ladder. By contrast, the Life Satisfaction reaction to changes in economic status is significantly lower among individuals who score high (low) in negative (positive) reciprocity, and are at the bottom of the distribution of neuroticism, extraversion. The heterogeneity on the importance of income comparisons needs to be taken into account when, for example, introducing them into economic models, predicting individuals’ behaviour, or making welfare judgments.