Essays on the Economics of Happiness.

Abstract

The first chapter demonstrates that although it is possible to design utility functions that behave like empirical well-being, the functional forms relying on income adaptation and social comparisons put forward in the happiness literature fail to receive empirical validation. Under the income adaptation conjecture, utility functions that can convert the kind of economic expansion experienced in the US in a non-growing happiness flow exhibit extremely high levels of adaptation that are not observed in individual level regressions. Functions that represent the preferences of agents who compare their income with the income in their region fail to explain why richer countries tend to be happier.

The second chapter of this dissertation shows that the lack of growth in average well-being, despite substantial GDP per capita growth, in the US is not a paradox. It can be explained by changes in the income distribution and the concavity of the happiness function. Since 1975 in the United-States practically all of the income gains have accrued to the richest 20% households. During that time, happiness has stagnated for the rich and fallen for the poor which is interpreted has rising happiness inequality. This pattern of spreading well-being between the income groups is also observed in Europe. These phenomena reflect the fact that although ``money buys happiness'', the relationship between the two is concave.

The primary objective of the third chapter is to document how men and women happiness differ. The secondary objective of the paper is to test whether gender specific factors can explain the decline in happiness of American women since the mid-seventies. The paper finds that well-being follows very different trajectory for men and women. Women tend to be happier when they are young; their happiness falls when they enter the labor force and declines onward. Men's happiness rises until they enter the labor market. Unlike women, men tend to get happier after retirement. Somewhat surprisingly, the analysis finds that weekly work hours are positively associated with happiness. Gender differences are identified and the results are consistent with the idea that labor force participation takes time away from women's production of happiness.