Presentation on theme: "Investigating Macroeconomic Determinants of Happiness in Transition Countries: How Important is Government Expenditure? Lena Malešević Perović and Silvia."— Presentation transcript:
1 Investigating Macroeconomic Determinants of Happiness in Transition Countries: How Important is Government Expenditure?Lena Malešević Perović and Silvia GolemUniversity of Split, Faculty of EconomicsDubrovnik, 24 June 2009
2 Introduction - happiness functions “Taking all things together, would you say you are:1 – very happy,2 – quite happy,3 – not very happy,4 – not at all happy”.General form:
3 Literature review - micro variables Happiness is higher for:women;married people;more educated people;those with higher income;the young and the old (U-shaped in age) andthe self-employed.
4 Literature review - macro variables Rarely analysed;Usually included variables: inflation, GDP, unemployment, government expenditure;Di Tella et al. (2001) find that people would trade-off a 1 percentage point increase in the unemployment rate for a 1.7 percentage point decrease in the inflation rate.
5 Literature review - government expenditure Bjornskov et al. (2007): find a negative relationship between life satisfaction and government consumption spending in a cross-section of 74, mainly developed, countries.Kacapyr (2008): finds that the ratio of government spending to GDP is statistically insignificant determinant of life satisfaction in the cross-country sample of 63 countries.Ram (2009): finds a positive relationship between government consumption and happiness employing a broad(er) cross-country sample of transition, developed, African and Latin American countries.
6 Our approach to including macro variables in happiness equation Unemployment;Inflation;GDP;Government expenditure.
7 Empirical analysisAnalysed countries: Albania, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia and Macedonia (Central and Eastern European Countries).Micro data: World Values Survey - waves 3, 4 and 5;Macro data: World Development Indicators;The model we use is:
8 The results - general 0.00079* Inflation (0.095) -0.0014 Unemployment EducationNo formal educationReferenceIncomplete primary school(0.528)Complete primary school0.0114(0.317)Incomplete secondary school0.0022**(0.050)Complete secondary school0.0375***(0.004)Some university-level education without degree0.0635***(0.000)University-level education with degree0.0855***(0.001)Employment statusFull timePart time(0.522)Self employed(0.690)Unemployed***Out of the labour force (OLF)*(0.056)Scale of income1 or 23 or 40.0063(0.320)5 or 60.0158(0.127)7 or 80.021(0.109)9 or 100.039**(0.033)Country dummiesWave dummiesVariableMarginal effectsInflation*(0.095)Unemployment(0.483)GDP per capita-5.49e-06(0.202)General government expenditure0.0093**(0.013)General government expenditure squared**(0.021)Demographic variablesMale dummy***(0.002)Age***(0.000)Age squared0.0005***Marital statusMarriedReferenceDivorced***Separated***Widowed***Single***
9 Marginal effect on macroeconomic variables in different combinations 123Inflation(0.279)Unemployment(0.852)GDP per capita-1.45e-07(0.971)General government expenditure0.0105***(0.007)**(0.027)**General government expenditure squared**(0.018)*(0.063)(0.058)Socio-demographic variablesCountry dummiesWave dummies
10 Marginal effects for different values of macro and micro variables Macro variables at sample meanMacro variables at 2007 averagesSuccessful woman averagesUnsuccessful manaveragesInflation*(0.095)*(0.090)*(0.075)*(0.088)Unemployment(0.483)(0.500)(0.487)(0.495)GDP per capita-5.49e-06(0.202)-2.84e-06(0.149)(0.171)-4.19e-07(0.136)General government expenditure0.0093**(0.013)0.0048***(0.005)0.0274**(0.011)***(0.008)General government expenditure squared**(0.021)**(0.009)**(0.016)**(0.015)Socio-demographic variablesCountry dummiesWave dummies
11 ConclusionGovernment expenditure significantly and non-linearly influences happiness in transition countries;Successful women vs. unsuccessful men;