Journal of Happiness Studies

, Volume 15, Issue 6, pp 1513–1537 | Cite as

Social Choice and Social Unemployment-Income Cleavages: New Insights from Happiness Research

  • Barbara Dluhosch
  • Daniel Horgos
  • Klaus W. Zimmermann
Research Paper


The nexus between income and happiness is very much disputed. Many cross-sectional studies seem to be in support of a positive relationship. Yet, the failure of most studies to find a similar link between increases in income through time and happiness in developed countries of the western hemisphere sparked an intense debate over the issue. Starting from the fact that the theoretical basis in happiness research has been comparatively weak, we develop a novel theoretical approach that allows us to identify distributional consequences of unemployment as a key factor in the nexus. Social cleavages rooted therein imply a bias in the social choice between private and public goods with the bias and thus the importance for happiness conditional on the level of per-capita income. Our theory is backed by corresponding empirical evidence in international data: controlling for a number of variables, we find that, in low-income countries, subjective well-being significantly depends on income per capita; however, in high-income countries, the unemployment-related distribution is more important as a determinant, with significance shifting from the level of per-capita income to cleavages associated with unemployment. Our findings thus emphasizes the relevance of the income-satiation hypothesis found in many longitudinal studies also in cross-sectional perspective.


Happiness Welfare economics Social choice Income distribution Unemployment 


  1. Alesina, A., Di Tella, R., & MacCulloch, R. (2004). Inequality and happiness: Are Europeans and Americans different?. Journal of Public Economics, 88, 2009–2042.CrossRefGoogle Scholar
  2. Apouey, B. H., Clark, A. E. (2013). Winning big but feeling no better? The effect of lottery prizes on physical and mental health. CEP Discussion Paper No 1228.Google Scholar
  3. Becchetti, L., Pelloni, A., & Rossetti, F. (2008). Relational goods, sociability, and happiness. Kyklos, 61, 343–363.CrossRefGoogle Scholar
  4. Blanchflower, D. G. (2009). International evidence on well-being. In A. B. Krueger (Eds.), Measuring the subjective well-being of nations (pp. 155–226). Chicago: NBER and University of Chicago Press.CrossRefGoogle Scholar
  5. Brickman, P., Coates, D., & Janoff-Bulman, R. (1978). Lottery winners and accident victims: Is happiness relative?. Journal of Personality and Social Psychology, 36, 917–927.CrossRefGoogle Scholar
  6. Buchanan, J. M., & Tullock, G. (1962). The calculus of consent: Logical foundations of constitutional democracy. Ann Arbor: University of Michigan Press.Google Scholar
  7. Cameron, S. (2005). Economics of suicide. In S. W. Bowmaker (Eds.), Economics uncut. A complete guide to life, death and misadventure (pp. 229–263). Cheltenham: Edward Elgar.Google Scholar
  8. Caunt, B. S., Franklin, J., Brodaty, N. E., & Brodaty, H. (2013). Exploring the causes of subjective well-being: A content analysis of peoples’ recipes for long-term happiness. Journal of Happiness Studies, 14, 475–499.CrossRefGoogle Scholar
  9. Chamberlain, G. (1980). Analysis of covariance with qualitative data. Review of Economic Studies, 47, 225–238.CrossRefGoogle Scholar
  10. Christoph, B. (2010). The relation between life satisfaction and the material situation: A re-evaluation using alternative measures. Social Indicators Research, 98, 475–99.CrossRefGoogle Scholar
  11. Clark, A. E. (2006). Unhappiness and unemployment duration. Applied Economics Quarterly, 52, 291–308.Google Scholar
  12. Clark, A. E., & Oswald, A. J. (1994). Unhappiness and unemployment. Economic Journal, 104, 648–659.CrossRefGoogle Scholar
  13. Clark, A. E., Frijters, P., & Shields, M. (2008). Relative income, happiness and utility: An explanation for the Easterlin paradox and other puzzles. Journal of Economic Literature, 46, 95–144.CrossRefGoogle Scholar
  14. Cysne, R. P. (2009). On the positive correlation between income inequality and unemployment. Review of Economics and Statistics, 91, 218–226.CrossRefGoogle Scholar
  15. Di Tella, R., & MacCulloch, R. J. (2008). Gross national happiness as an answer to the Easterlin paradox?. Journal of Development Economics, 86, 22–42.CrossRefGoogle Scholar
  16. Di Tella, R., MacCulloch, R. J., & Oswald, A. J. (2001). Preferences over inflation and unemployment: Evidence from surveys of happiness. American Economic Review, 91, 335–341.CrossRefGoogle Scholar
  17. Di Tella, R., MacCulloch, R. J., & Oswald, A. J. (2003). The macroeconomics of happiness. Review of Economics and Statistics, 85, 809–827.CrossRefGoogle Scholar
  18. Diener, E. (1994). Assessing subjective well-being: Progress and opportunities. Social Indicators Research, 31, 103–57.CrossRefGoogle Scholar
  19. Diener, E., & Seligman, M. E. P. (2004). Beyond money. Toward an economy of well-being. Psychological Research in the Public Interest, 5, 1–31.CrossRefGoogle Scholar
  20. Drakopoulos, S. A. (2008). The paradox of happiness: Towards an alternative explanation. Journal of Happiness Studies, 9, 303–315.CrossRefGoogle Scholar
  21. Easterlin, R. A. (1974). Does Economic Growth Improve the Human Lot?. In P. A. David & M. W. Reeder (Eds.), Nations and households in economic growth: Essays in honor of Moses Abramovitz (pp. 89–125). New York: Academic Press.CrossRefGoogle Scholar
  22. Easterlin, R. A. (2005). Feeding the illusion of growth and happiness: A reply to Hagerty and Vennhoven. Social Indicators Research, 74, 429–443.CrossRefGoogle Scholar
  23. Easterlin, R. A. (2006). Building a better theory of well-being. In L. Bruni & P. L. Porta (Eds.), Economics happiness: Framing the analysis (pp. 29–64). New York: Oxford University Press.Google Scholar
  24. Easterlin, R. A. (2010). Happiness, growth and the life cycle. New York: Oxford University Press.Google Scholar
  25. Easterlin, R. A., & Angelescu, L. (2010). Happiness and growth the world over: Time series evidence on the happiness—income paradox. In R. A. Easterlin (Eds.), Happiness, growth, and the life cycle (Ch. 5. Oxford: Oxford University Press.Google Scholar
  26. Easterlin, R. A., & Plagnol, A. (2008). Life satisfaction and economic conditions in east and west germany pre- and post-unification. Journal of Economic Behavior and Organization, 68, 433–444.CrossRefGoogle Scholar
  27. Easterlin, R. A. (2009). Happiness and the Easterlin paradox., April 10 (Accessed Sep 13, 2013).
  28. Ferrer-i Carbonell, A., & Frijters, P. (2004). How important is methodology for the estimates of the determinants of happiness? Economic Journal, 114, 641–659.CrossRefGoogle Scholar
  29. Frank, R. H. (2005). Does absolute income matter?. In L. Bruni & P. L. Porta (Eds.), Economics and happiness (pp. 65–90). Oxford: Oxford University Press.CrossRefGoogle Scholar
  30. Frey, B. S., & Stutzer, A. (2002). Happiness and economics. Princeton: Princeton University Press.Google Scholar
  31. Galbraith, J. K. (2008). Inequality, unemployment and growth: New measures for old controversies. Journal of Economic Inequality, 7, 189–206.CrossRefGoogle Scholar
  32. Gamble, A., & Gärling, T. (2012). The relationship between life satisfaction, happiness, and current mood. Journal of Happiness Studies, 13, 31–45.CrossRefGoogle Scholar
  33. Gardner, J., & Oswald, A. J. (2007). Money and mental wellbeing: A longitudinal study of medium-sized lottery wins. Journal of Health Economics, 26, 49–60.CrossRefGoogle Scholar
  34. Graham, C., & Felton, A. (2006). Inequality and happiness: Insights from Latin America. Journal of Economic Inequality, 4, 107–122.CrossRefGoogle Scholar
  35. Guriev, S., & Zhuravskaya, E. (2009). (Un)happiness in transition. Journal of Economic Perspectives, 23, 143–168.CrossRefGoogle Scholar
  36. Hammond, P. J., Liberini, F., Proto, E. (2011). Individual welfare and subjective well-being: Commentary inspired by Sacks, Stevenson and Wolfers. Warwick Econ. Research Papers, 957, University of Warwick.Google Scholar
  37. Helliwell, J. F., & Barrington-Leigh, C. P. (2010). Viewpoint: Measuring and understanding subjective well-being. Canadian Journal of Economics, 43, 729–53.Google Scholar
  38. Helliwell, J., & Putnam, R. D. (2005). The social context of well-being. In F. Huppert, N. Baylis & B. Keverne (Eds.), The science of well-being (pp. 435–460). Oxford: Oxford University Press.Google Scholar
  39. Hopkins, E. (2008). Inequality, happiness and relative concerns: What actually is their relationship?. Journal of Economic Inequality, 6, 351–372.CrossRefGoogle Scholar
  40. Inglehart, R. (1997). Modernization and postmodernization: Cultural, economic and political change in 43 societies. Princeton: Princeton University Press.Google Scholar
  41. Inglehart, R., & Klingemann, H.-D. (2000). Genes, culture, democracy and happiness. In E. Diener & E. M. Suh (Eds.), Culture and subjective well-being (pp. 165–183). Cambridge MA: MIT Press.Google Scholar
  42. Inglehart, R., Foa, R., Peterson, C., & Welzel, C. (2008). Development, freedom and rising happiness. A global perspective (1981–2007). Perspectives on Psychological Science, 3, 264–285.CrossRefGoogle Scholar
  43. Layard, R. (2003). Happiness: Has social science a clue? Lionel Robbins memorial lectures 2002/3, London School of Economics. Accessed 13 Sep 2013.
  44. Layard, R. (2005). Happiness: Lessons from a new science. London: Penguin.Google Scholar
  45. Lipset, S. M., Rokkan, S. (Eds.) (1967). Party systems and voter alignments: Cross-national perspectives. New York: The Free Press.Google Scholar
  46. Luttmer, E. F. P. (2005). Neighbors as negatives: Relative earnings and well-being. Quarterly Journal of Economics, 120, 963–1002.Google Scholar
  47. Musgrave, R. A., & Musgrave, P. B. (1989). Public finance in theory and practice. New York: McGraw-Hill.Google Scholar
  48. Nolan, B. (1986). Unemployment and the size distribution of income. Economica, 53, 421–445.CrossRefGoogle Scholar
  49. Ochsen, C. (2011). Subjective well-being and aggregate unemployment: Further evidence. Scottish Journal of Political Economy, 58(5), 634–655.CrossRefGoogle Scholar
  50. Sacks, D. W., Stevenson, B., Wolfers, J. (2010). Subjective well-being, income, economic development and growth. CEPR Discussion Paper No. 8048.Google Scholar
  51. Samuelson, P. A. (1954). The pure theory of public expenditure. Review of Economics and Statistics, 36, 387–389.CrossRefGoogle Scholar
  52. Samuelson, P. A. (1955). Diagrammatic exposition of a theory of public expenditure. Review of Economics and Statistics, 37, 350–356.CrossRefGoogle Scholar
  53. Schyns, P. (2002). Wealth of nations, individual income and life satisfaction in 42 countries: A multilevel approach. Social Indicators Research, 60, 5–40.CrossRefGoogle Scholar
  54. Stevenson, B., & Wolfers, J. (2008). Economic growth and subjective well-being: Reassessing the Easterlin Paradox. Brookings Papers on Economic Activity, 2008(1), 1–87.CrossRefGoogle Scholar
  55. The Economist (2010). The joyless or the jobless. Should governments pursue happiness rather than economic growth? Nov. 27 2010, p. 78.Google Scholar
  56. Tsoukis, C. (2007). Keeping up with the joneses, growth, and distribution. Scottish Journal of Political Economy, 54(4), 575–600.CrossRefGoogle Scholar
  57. Tullock, G. (1976). The vote motive. Institute of Economic Affairs, London, Hobart Paper Back No. 9.Google Scholar
  58. Van Praag, B. (2011). Well-being inequality and reference groups: An agenda for new research. Journal of Economic Inequality, 9, 111–127.CrossRefGoogle Scholar
  59. Van Praag, B., & Ferrer-i Carbonell, A. (2004). Happiness quantified: A satisfaction calculus approach. Oxford: Oxford University Press.CrossRefGoogle Scholar
  60. Vanassche, S., Swicegood, G., & Matthijs, K. (2013). Marriage and children as a key to happiness? Cross national differences in the effects of marital status and children on well-being. Journal of Happiness Studies, 14, 501–524.CrossRefGoogle Scholar
  61. Veenhoven, R. (2012). Happiness: Also Known As “life satisfaction” and “subjective well-being”. In K. C. Land,. C. Michalos & M. J. Sirgy & (Eds.), Handbook of social indicators and quality of life research (pp. 63–77). Dordrecht: Springer.CrossRefGoogle Scholar
  62. Winkelmann, L., & Winkelmann, R. (1998). Why are the unemployed so unhappy? Evidence from panel data. Economica, 65, 1–15.CrossRefGoogle Scholar
  63. Wolfers, J. (2003). Is business cycle volatility costly? Evidence from surveys of subjective wellbeing. International Finance, 6, 1–26.CrossRefGoogle Scholar
  64. Wolff, E. N., & Zacharias, A. (2009). Household wealth and the measurement of economic well-being in the United States. Journal of Economic Inequality, 7, 83–115.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media Dordrecht 2013

Authors and Affiliations

  • Barbara Dluhosch
    • 1
  • Daniel Horgos
    • 1
  • Klaus W. Zimmermann
    • 1
  1. 1.Department of EconomicsHelmut Schmidt University/University FAF HamburgHamburgGermany

Personalised recommendations