Happiness in Europe Cross-country differences in the determinants of subjective Well-Being

1
Happiness in EuropeCross-country differences in
the determinants of subjective Well-Being

• EPUNet Conference 2006
• Peder J. Pedersen
• University of Aarhus
• Torben Dall Schmidt
• University of Southern Denmark
• Work in progress!

2
Happiness in EuropeContent

• The issue, results and data does absolute or
  relative income change matter for the happiness
  of Europeans?
• Cross-country differences in the happiness with
  the main activity in the ECHP does it vary?
• Levels Income effects on the level of
  well-being?
• household equivalent income
• subjective evaluation of income gains
• does change in individual income relative to
  average income change in society matter?
• Changes Does change in income relative to
  average change in society matter for change in
  well-being?
• Summary a North-South divide and others?

3
Happiness in EuropeThe issue

• Individual utility interpreted as the interaction
  between preferences and a budget restriction
• Income should be of importance for the outcome in
  happiness!
• Previous studies mostly fail to find any narrow
  relationship between happiness and income
• e.g. Bjørnskov, Datta Gupta and Pedersen (2005)
  where acceleration in income matters but not
  income level or change in income (based on
  Eurobarometer cross-sections/macro)
• Are we able to find a clear relationship when
  using obser-vations on individual behaviour from
  the ECHP and what are the cross-country
  differences?

4
Happiness in EuropeThe results

• Level of well-being (probability of being happy)
• Absolute income level positive for well-being
• Health and change in health matters for
  well-being
• Mostly positive impact from being 60 years on
  well-being
• Transition from job to unemployment negative for
  well-being
• Women less happy in Southern European countries
• Cohabitation positive for well-being
• Subjective evaluation of income gain positive for
  well-being
• North-South divide Change in income relative to
  average change in society important for level of
  well-being in Southern Europe

• Change in well-being (probability of
  increasing/decreasing well-being)
• Improved health positive for increase in
  well-being insignificant for decrease in
  well-being
• Transition from employment to unemployment leads
  to a clear decline in well-being
• Transition from unemployment to employment
  positive for increase in well-being
• Exit from labour force positive for increase in
  well-being
• Change in income relative to average in society
  no significant impact on change in well-being!

5
Happiness in EuropeThe data

• Initially focus on four countries representing
  European welfare state types
• Denmark (Nordic or Social democratic model)
• France (Continental model)
• Ireland (Liberal model)
• Italy (Southern model)
• Next focus on a wider set of EU countries
• Sample ECHP 1998-2000 for persons of age 18
  years or more
• The dependent variable dichotomous variable
  based on pk001 Satisfaction with work or main
  activity or the change in this symmetric
  around 0 (base 0)
• pk001 contains six response categories ranging
  from 1 Not satisfied to 6 Fully satisfied
• satspliteq takes value 0 if pk0011,2,3 and
  value 1 if pk0014,5,6
• The covariates

• Measures of equivalent income and income
  changerelative to average (hi100/hd004)
• Self-evaluation of income change (hf015)
• Age (pd003)
• Gender/female (pd004)
• Cohabitational status (pd008)
• Children aged less than 12 years (hl001)

• Main activity (pe001)
• Education (pt022)
• Health (ph001)
• Crime (ha022)
• Pollution (ha021)
• and changes in some of these variables

6
Happiness in EuropeHappiness with the main
activity in the ECHP

• Cross-country variation in average happiness
  levels is the variation to be explained? (wave
  7 2000)
• Differences are outspoken with a decreasing
  average in the sequence Denmark-Ireland-France-Ita
  ly

7
Happiness in EuropeHappiness with the main
activity in the ECHP

• Does the equal split in the subjective well-being
  in pk001 lead to a bias? Case Denmark
• Value 6 decreasing while others increasing
  intra-group dynamics but share of values 4, 5 and
  6 constant over time only decreases by 0,2
  percentage points
• The distribution of response categories in pk001
  does seem stable over the eight waves for Denmark

8
Happiness in EuropeLevels
Denmark probit for dichotomous variable - equal
split of pk001 - phase 1a, 1b and 1c

• Denmark probit for dichotomous variable
• Being rich, old and cohabiting with a subjective
  evaluation of income gains increases the
  probability of being happy
• Bad health leads to a higher probability of not
  being happy

9
Happiness in EuropeLevels
Denmark probit for dichotomous variable - equal
split of pk001 - phase 1a, 1b and 1c

• France probit for dichotomous variable
• Being rich, old, cohabiting and having a
  subjective evaluation of income gains increases
  the probability of being happy
• Being in the labour force, bad health, crime and
  pollution in the neighbourhood leads to a higher
  probability of not being happy

10
Happiness in EuropeLevels
Denmark probit for dichotomous variable - equal
split of pk001 - phase 1a, 1b and 1c

• Ireland probit for dichotomous variable
• Being rich, old and cohabiting with a subjective
  evaluation of income gains increases the
  probability of being happy
• Bad health leads to a higher probability of not
  being happy

11
Happiness in EuropeLevels
Denmark probit for dichotomous variable - equal
split of pk001 - phase 1a, 1b and 1c

• Italy probit for dichotomous variable
• Being rich, in the labour force, highly
  educated,cohabiting,children under 12 in the
  household and having a subjective evaluation of
  income gains increases the probability of being
  happy
• Bad health, female and crime leads to a higher
  probability of not being happy

12
Happiness in Europe Changes in well-being
including more countries
Denmark probit for dichotomous variable - equal
split of pk001 - phase 1a, 1b and 1c

• The North-South divide in Europe
• Increase in relative income only increases
  probability of well-being in Southern Europe
• Marginal effect is decreasing (chg2meaneqiinc)
• Better health increases probability of well-being
  and improving well-being
• Employed to unemployed reduced probability of
  well-being and probability of decreasing
  well-being
• Unemployed to employed increases probability of
  improving well-being
• Becoming inactive increases probability of
  improving well-being
• Being old increases probability of well-being
• Education increases probability well-being

13
Happiness in Europe?Summary

• Summary
• Income levels matters for happiness in Europe
• North-South divide changes in income relative
  to average change in society matters in Southern
  Europe
• Labour market transitions lead to expected
  changes in happiness
• Older groups of population tends to be more
  happy, which may be correlated with propensity to
  withdraw from labour market increases happiness
• Gender matters for southern European countries