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Inflation, Unemployment, and Happiness: Misery Index Weights in Europe

Arge, Jón Sjúrður Pálsson LU (2022) NEKP01 20221
Department of Economics
Abstract
This paper uses micro- and macrolevel data to examine the effects of unemployment and inflation on subjective happiness in Europe. Using data on subjective happiness from the most recent survey waves of the European Social Survey (2004-2018), we find negative coefficients for both unemployment and inflation. However, the marginal effect of unemployment is larger and more robust than that of inflation. In a post-2008 subsample we find that inflation becomes insignificant. Generally, using macrolevel control variables, we find that the significance of inflation weakens or goes away in some cases, whereas the sign and significance of unemployment are largely unchanged, although unemployment becomes insignificant in a subsample of high-income... (More)
This paper uses micro- and macrolevel data to examine the effects of unemployment and inflation on subjective happiness in Europe. Using data on subjective happiness from the most recent survey waves of the European Social Survey (2004-2018), we find negative coefficients for both unemployment and inflation. However, the marginal effect of unemployment is larger and more robust than that of inflation. In a post-2008 subsample we find that inflation becomes insignificant. Generally, using macrolevel control variables, we find that the significance of inflation weakens or goes away in some cases, whereas the sign and significance of unemployment are largely unchanged, although unemployment becomes insignificant in a subsample of high-income households. On the other hand, we find that the magnitude of the unemployment coefficient increases and becomes statistically more significant for a subsample of the poorest income deciles. Our results indicate that low-income households have a stronger preference for lower unemployment than high-income households. We also try to address possible endogeneity issues by using a weak instrument for inflation, namely landmass. (Less)
Please use this url to cite or link to this publication:
author
Arge, Jón Sjúrður Pálsson LU
supervisor
organization
course
NEKP01 20221
year
type
H2 - Master's Degree (Two Years)
subject
keywords
happiness economics, inflation, unemployment, misery index
language
English
id
9083103
date added to LUP
2022-10-10 11:18:48
date last changed
2022-10-10 11:18:48
@misc{9083103,
  abstract     = {{This paper uses micro- and macrolevel data to examine the effects of unemployment and inflation on subjective happiness in Europe. Using data on subjective happiness from the most recent survey waves of the European Social Survey (2004-2018), we find negative coefficients for both unemployment and inflation. However, the marginal effect of unemployment is larger and more robust than that of inflation. In a post-2008 subsample we find that inflation becomes insignificant. Generally, using macrolevel control variables, we find that the significance of inflation weakens or goes away in some cases, whereas the sign and significance of unemployment are largely unchanged, although unemployment becomes insignificant in a subsample of high-income households. On the other hand, we find that the magnitude of the unemployment coefficient increases and becomes statistically more significant for a subsample of the poorest income deciles. Our results indicate that low-income households have a stronger preference for lower unemployment than high-income households. We also try to address possible endogeneity issues by using a weak instrument for inflation, namely landmass.}},
  author       = {{Arge, Jón Sjúrður Pálsson}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Inflation, Unemployment, and Happiness: Misery Index Weights in Europe}},
  year         = {{2022}},
}