Di Tella, Rafael, Robert J. MacCulloch, and Andrew J. Oswald. “Preferences over inflation and unemployment: Evidence from surveys of happiness.” The American economic review 91.1 (2001): 335-341. 원문링크
The paper presents a new approach to study standard questions in macroeconomics. It studies reported well-being data on a quarter of a million people across twelve European countries and the United States. We show that people appear to be happier when inflation and unemployment are low. Consistent with the standard macroeconomics textbook’s assumption that there exists a social objective function W(p, U), randomly sampled individuals mark systematically lower in well-being surveys when there is inflation or unemployment in their country. The rates of price change and joblessness affect reported satisfaction with life after controlling for the personal characteristics of the respondents, country fixed effects, year effects, country-specific time trends, and a lagged dependent variable. A function reminiscent of the textbook W(p, U) exists in the data.
A large literature in economics has tried to measure the losses from inflation. By examining the appropriate area under a money demand curve, Martin Bailey (1956) and Milton Friedman (1969) originally concluded that inflation has only small costs. Similarly, Fischer (1981) and Robert Lucas (1981) find the cost of inflation to be low, at 0.3 per cent and 0.45 per cent of national income, respectively, for a 10 per cent level of inflation. The numbers implied by our happiness-equation estimates are consistent with larger welfare losses.
At the margin, unemployment depresses reported well-being more than does inflation. In a panel that controls for country fixed-effects and year effects, the estimates suggest that people would trade off a 1 percentage point increase in the unemployment rate for a 1.7 percentage point increase in the inflation rate. Hence, according to these findings, the famous ‘misery index’ W(p+U) somewhat under-weights the unhappiness caused by unemployment.
It seems possible that the methods used in this paper — the study of well-being regression equations — may prove useful in other areas of macro-economics.