Working Paper: NBER ID: w25622
Authors: Ricardo Pereztruglia
Abstract: In 2001, Norwegian tax records became easily accessible online, allowing everyone in the country to observe the incomes of everyone else. According to the income comparisons model, this change in transparency can widen the gap in well-being between richer and poorer individuals. We test this hypothesis using survey data from 1985–2013. Using multiple identification strategies, we show that the higher transparency increased the gap in happiness between richer and poorer individuals by 29%, and it increased the life satisfaction gap by 21%. We provide suggestive evidence that some, although probably not all, of this effect relates to changes in self-perceptions of relative income. We provide back-of-the-envelope estimates of the importance of income comparisons, and discuss implications for the ongoing debate on transparency policies.
Keywords: income transparency; wellbeing; natural experiment; happiness; life satisfaction
JEL Codes: D03; D31; D60; D83; I31; Z10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Income transparency (D31) | Self-perceptions of income rank (D31) |
| Income transparency (D31) | Self-perceptions of income adequacy (D31) |
| Self-perceptions of income rank (D31) | Happiness-income gradient (D31) |
| Self-perceptions of income adequacy (D31) | Happiness-income gradient (D31) |
| Income transparency (D31) | Life satisfaction-income gradient (D31) |
| Income transparency (D31) | Happiness-income gradient (D31) |