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The Macroeconomics of Happiness

Author

Listed:
  • Di Tella, R.
  • MacCulloch, R.J.: Oswald, A.J.

Abstract

A large literature in macroeconomics assumes a social objective function, W(pi,U), where inflation, pi, and unemployment, U, are bads. This paper provides some of the first formal evidence for such an approach. It issues data on the reported well-being levels of approximately one quarter of a million sampled Europeans and Americans from the 1970's to the 1990's. After controlling for personal characteristics, year dummies and countries fixed effects, we find that the data trace out a W(pi,U) function. It is approximately a linearly additive "misery index". The paper calculates the implied dollar value of a low inflation rate. It also examines the struture of happiness equations across countries and time.

Suggested Citation

  • Di Tella, R. & MacCulloch, R.J.: Oswald, A.J., 1997. "The Macroeconomics of Happiness," Papers 19, Centre for Economic Performance & Institute of Economics.
    • Handle: RePEc:fth:cepies:19
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    More about this item

    Keywords

    UNEMPLOYMENT ; INFLATION;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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