• DOI:10.1162/003465303772815745
• Corpus ID: 1914665

The Macroeconomics of Happiness

@article{Tella2003TheMO,
  title={The Macroeconomics of Happiness},
  author={Rafael M. Di Tella and Robert J. MacCulloch and Andrew J. Oswald},
  journal={Review of Economics and Statistics},
  year={2003},
  volume={85},
  pages={809-827}
}

• Rafael M. Di Tella, Robert J. MacCulloch, A. Oswald
• Published 1 November 2003
• Economics
• Review of Economics and Statistics

We show that macroeconomic movements have strong effects on the happiness of nations. First, we find that there are clear microeconomic patterns in the psychological well-being levels of a quarter of a million randomly sampled Europeans and Americans from the 1970s to the 1990s. Happiness equations are monotonically increasing in income, and have similar structure in different countries. Second, movements in reported well-being are correlated with changes in macroeconomic variables such as gross domestic product. This holds true after controlling for the personal characteristics of respondents, country fixed effects, year dummies, and country-specific time trends. Third, the paper establishes that recessions create psychic losses that extend beyond the fall in GDP and rise in the number of people unemployed. These losses are large. Fourth, the welfare state appears to be a compensating force: higher unemployment benefits are associated with higher national well-being.