Happiness and economic growth lessons from developing countries

Happiness and Economic Growth Studies of Policy Reform Series Editors Daniel Cohen and Franỗois Bourguignon This series brings new and innovative policy research to the forefront of academic and policy debates It addresses the widest range of policies, from macroeconomics to welfare, public finance, trade, migration, and the environment It hosts collaborative work under the auspices of CEPR, CEPREMAP, and the Paris School of Economics Titles Published in the Series The Economics of Clusters Gilles Duranton, Philippe Martin, Thierry Mayer, and Florian Mayneris Cultural Integration of Immigrants in Europe Edited by Yann Algan, Alberto Bisin, Alan Manning, and Thierry Verdier Happiness and Economic Growth: Lessons from Developing Countries Edited by Andrew E Clark and Claudia Senik Happiness and Economic Growth Lessons from Developing Countries Edited by Andrew E Clark and Claudia Senik 1 Great Clarendon Street, Oxford, OX2 6DP, United Kingdom Oxford University Press is a department of the University of Oxford It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries © CEPREMAP 2014 The moral rights of the authors have been asserted First Edition published in 2014 Impression: 1 All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, by licence or under terms agreed with the appropriate reprographics rights organization Enquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above You must not circulate this work in any other form and you must impose this same condition on any acquirer Published in the United States of America by Oxford University Press 198 Madison Avenue, New York, NY 10016, United States of America British Library Cataloguing in Publication Data Data available Library of Congress Control Number: 2014940455 ISBN 978–0–19–872365–3 Printed and bound by CPI Group (UK) Ltd, Croydon, CR0 4YY Links to third party websites are provided by Oxford in good faith and for information only Oxford disclaims any responsibility for the materials contained in any third party website referenced in this work Contents List of Contributors List of Figures List of Tables Introduction Andrew E Clark and Claudia Senik Life Satisfaction in the Transition from Socialism to Capitalism: Europe and China Richard A. Easterlin Discussion by Yann Algan The Great Happiness Moderation: Well-being Inequality during Episodes of Income Growth Andrew E Clark, Sarah Flèche, and Claudia Senik Discussion by Paul Seabright Poor, or Just Feeling Poor? On Using Subjective Data in Measuring Poverty Martin Ravallion Discussion by Ekaterina Zhuravskaya Subjective Well-being and Social Evaluation: A Case Study of China John Knight and Ramani Gunatilaka Discussion by Xiaobo Zhang Income Comparisons in Chinese Villages Andrew E Clark and Claudia Senik Discussion by Ada Ferrer-i-Carbonell vii xi xiii 32 140 179 216 v Contents Happiness and Economic Growth: A Panel Discussion Stéfan Lollivier, Conal Smith, Martin Ravallion, and Richard A Easterlin 240 Concluding Remarks How Inequality Matters to Well-being: Agency, Adaptation, and Changes versus Levels 249 Carol Graham Name Index Subject Index vi 267 271 List of Contributors Yann Algan is Professor of Economics at Sciences Po, Paris He is also a fellow at CEPR and IZA and is co-head of CEPREMAP’s macroeconomic program His research interests are public economics, political economy, experimental economics, and macroeconomics He is the author of La Société de défiance (2012) (with Pierre Cahuc) and Cultural and Economic Integration in Europe (Oxford University Press, 2010) (with Alberto Bisin, Alan Manning, and Thierry Vierder) and has published in top economic journals such as American Economic Review, Quarterly Journal of Economics, Economic Journal, and Journal of European Economic Association He was awarded Best French Young Economist in 2009, has been a visiting professor at MIT (2007) and Harvard (2008), and is co-director of the Sciences Po Master’s course in Economics and Public Policy Andrew E Clark holds a PhD from the LSE He is CNRS Research Professor at the Paris School of Economics, and previously held posts at Dartmouth, Essex, CEPREMAP, DELTA, the OECD, and the University of Orléans His work has used job and life satisfaction scores, and other psychological indices as proxy measures of utility His research has addressed relative utility or comparisons (to others like you, to your partner, and to yourself in the past), and the use of long-run panel data in collaboration with psychologists to map out habituation to life events (such as job loss, marriage, and divorce) Richard A.  Easterlin is currently University Professor and Professor of Economics, University of Southern California He is a member of the National Academy of Sciences and a Distinguished Fellow of the American Economic Association He is also a Fellow of the American Academy of Arts and Sciences, the Econometric Society, and the Institute for the Study of Labor (IZA), and is a former president of the Population Association of America, Economic History Association, and Western Economic Association International He is the author, among other things, of Happiness, Growth and the Life Cycle (2010), The Reluctant Economist (2004), Growth Triumphant: The 21st Century in Historical Perspective (1996), and Birth and Fortune: The Impact of Numbers on Personal Welfare (1980; 2nd edn 1987), and editor of Happiness in Economics (2002) His current research is on the association between economic growth, public policy, and subjective well-being vii List of Contributors Ada Ferrer-i-Carbonell is a tenured scientist in the Institute for Economic Analysis (IAE-CSIC) in Barcelona and Barcelona Graduate School of Economics’ Deputy Director for Academic Programs She is Research Fellow at IZA, Barcelona GSE, and MOVE, and an associate editor of the Journal of Economic Behavior and Organization Ada has PhDs in Economics from Rensselaer Polytechnic Institute (United States, 2003) and the Tinbergen Institute (University of Amsterdam, 2003) Her current interests are in the area of welfare analysis (through subjective well-being measures), including health, inequality, and risk attitudes She has published (with Bernard Van Praag) Happiness Quantified: A Satisfaction Calculus Approach (Oxford University Press, 2004) Sarah Flèche is a PhD student from the European Doctoral Program (EDP), jointly organized by the Paris School of Economics and the London School of Economics Her research interests include economics of happiness, health and institutional studies She has an M.A degree in economics from the Ecole Normale Supérieure From 2010 to 2013, she was a consultant at the OECD and was involved in a research program on new measures of well-being Ramani Gunatilaka has been working as a development economist in Sri Lanka and the region since graduating from the Universities of London and Oxford in 1992–3 She received a PhD in Applied Econometrics from Monash University, Australia in 2006 for her thesis on income distribution in Sri Lanka after economic liberalization She is a member of the Faculty of Graduate Studies, University of Colombo, Sri Lanka Her research has concentrated on poverty alleviation, rural development, microfinance, and labor market issues in Sri Lanka, Afghanistan, and the Maldives, and on the determinants of subjective well-being in China Carol Graham is Leo Pasvolsky Senior Fellow at the Brookings Institution and College Park Professor at the University of Maryland She has been a Vice President at Brookings and a Special Advisor to the Vice President of the InterAmerican Development Bank Graham is the author of numerous books— most recently The Pursuit of Happiness: An Economy of Well-Being (Brookings, 2011) and Happiness Around the World: The Paradox of Happy Peasants and Miserable Millionaires (OUP, 2009)—and has published articles in a range of journals including the World Bank Research Observer, Health Affairs, Journal of Economic Behavior and Organization, Health Economics, and Journal of SocioEconomics Her work has been reviewed in Science, The New Yorker, and the New York Times, among others She has an A.B from Princeton, an M.A from Johns Hopkins, a PhD from Oxford University, and three beautiful children John Knight is Emeritus Professor of Economics and Emeritus Fellow of St Edmund Hall in the University of Oxford He has conducted research on viii List of Contributors African countries and on China, mainly on issues such as human resources, poverty, and subjective well-being His recent books include Towards a Labour Market in China (2005) and China’s Remarkable Economic Growth (2012; both Oxford University Press) He holds a Leverhulme emeritus fellowship, is a visiting professor at Beijing Normal University, and is the academic director of the Oxford Chinese Economy Programme Stéfan Lollivier is now working in the French Institute of Statistics as director of a program in charge of the implementation of a register of dwellings He was previously Director of Demographic and Social Statistics in the same institute (2004–11) and Director of the Ecole Nationale de la Statistique et de l’Administration Economique (ENSAE, 1999–2004) In 2010–11, he co-chaired the European Task Force about Quality of Life in charge of the implementation of the Stiglitz recommendations Recent publications include a chapter in The Econometrics of Panel Data (3rd edn: Springer Verlag, 2008), ed Matyas and Sevestre, with M. Lechner and T. Magnac (2008) and a paper about unemployment in the International Economic Review with Laurence Rioux (2010) Martin Ravallion holds the inaugural Edmond D. Villani Chair of Economics at Georgetown University, prior to which he was Director of the World Bank’s research department He has advised numerous governments and international agencies on poverty and policies for fighting it, and he has written extensively on this and other subjects in economics, including three books and 200 papers in scholarly journals and edited volumes He is President-elect of the Society for the Study of Economic Inequality, a Senior Fellow of the Bureau for Research in Economic Analysis of Development, a Research Associate of the National Bureau of Economic Research, USA, and a non-resident Fellow of the Center for Global Development Among various prizes and awards, in 2012 he was awarded the John Kenneth Galbraith Prize from the American Agricultural and Applied Economics Association Paul Seabright is Professor of Economics at the Toulouse School of Economics and Director of the Institute for Advanced Study in Toulouse He has taught at the Universities of Oxford and Cambridge and at the Ecole Polytechnique in Paris His book The Company of Strangers: A Natural History of Economic Life (2nd edn, Princeton 2010) was shortlisted for the 2005 British Academy Book Prize His most recent book The War of the Sexes: How Conflict and Cooperation Have Shaped Men and Women from Prehistory to the Present, was published by Princeton in 2011 Claudia Senik is Professor of Economics at the Paris School of Economics and the University Paris-Sorbonne She is also a member of the IZA and of the Institut Universitaire de France Educated at the Ecole Normale Supérieure, she received her PhD from EHESS Her main research areas include happiness ix ... Manning, and Thierry Verdier Happiness and Economic Growth: Lessons from Developing Countries Edited by Andrew E Clark and Claudia Senik Happiness and Economic Growth Lessons from Developing Countries. .. (1991–2010) 2.1a Happiness inequality and GDP per capita, in WVS countries 2.1b Happiness inequality and GDP per capita across rich and poor countries 2.2 Happiness inequality over time, western countries. .. happiness, and happiness inequality, Great Britain (BHPS) 2.5. Trends in income growth, average happiness, and happiness inequality, Germany (SOEP) 2.6. Trends in income growth, average happiness, and