Working Paper: CEPR ID: DP7258
Authors: Sergei Guriev; Ekaterina Zhuravskaya
Abstract: Despite strong growth performance in transition economies in the last decade, residents of transition countries report abnormally low levels of life satisfaction. Using data from the World Values Survey and other sources, we study various explanations of this phenomenon. First, we document that the disparity in life satisfaction between residents of transition and non-transition countries is much larger among the elderly. Second, we find that deterioration in public goods provision, an increase in macroeconomic volatility, and a mismatch of human capital of residents educated before transition which disproportionately affected the aged population explain a great deal of the difference in life satisfaction between transition countries and other countries with similar income and other macroeconomic conditions. The rest of the gap is explained by the difference in the quality of the samples. As in other countries, life satisfaction in transition countries is strongly related to income; but, due to a higher non-response of high-income individuals in transition countries, the survey-data estimates of the recent increase in life satisfaction, driven by 10-year sustained economic growth in transition region, are biased downwards. The evidence suggests that if the region keeps growing at current rates, life satisfaction in transition countries will catch up with the "normal" level in the near future.
Keywords: happiness; satisfaction; transition; unhappiness
JEL Codes: A13; I21; P36
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| deterioration in public goods provision (H42) | lower life satisfaction in transition countries (P27) |
| increased macroeconomic volatility (E32) | lower life satisfaction in transition countries (P27) |
| mismatch of human capital (D29) | lower life satisfaction in transition countries (P27) |
| economic growth continues (O49) | life satisfaction likely to improve in transition countries (P27) |
| lower life satisfaction in transition countries (P27) | lower life satisfaction in non-transition countries (P36) |
| 10% increase in absolute household income (D19) | increase in life satisfaction in transition economies (P27) |
| 10% increase in absolute household income (D19) | increase in life satisfaction in non-transition countries (P27) |