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Reversing the question. Does happiness affect consumption and savings behavior?

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posted on 2008-01-01, 00:00 authored by Cahit Guven
Better understanding of the relationship between happiness and economic behavior may help design economic policies such as tax and retirement policies, and regulate the timing of macroeconomic announcements. I examine the impact of happiness on consumption and savings behavior. I
use data from the DNB Household Survey from the Netherlands and the
German Socio-Economic Panel. Instrumenting individual happiness with
regional sunshine, the results suggest that happier people save more, spend less, and have a lower marginal propensity to consume. Happier people take more time for making decisions and have more control over expenditures; they expect a longer life and (accordingly) seem more concerned about the future than the present; they also expect less in
ation in the future. The results of the paper might also help understand the observed low coefficient on income in any happiness equation that does not instrument income.

History

Series

School Working Paper - Economics Series ; 2008/20

Pagination

1 - 50

Publisher

Deakin University, School of Accounting, Economics and Finance

Place of publication

Geelong, Vic.

Language

eng

Publication classification

CN.1 Other journal article

Copyright notice

2008, The Authors

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