Accounting for Unobserved Country Heterogeneity in Happiness Research: Country Fixed Effects versus Region Fixed Effects

Fischer, Justina AV (2010): Accounting for Unobserved Country Heterogeneity in Happiness Research: Country Fixed Effects versus Region Fixed Effects.

Abstract

Many empirical studies are ambiguous about whether good formal institutions are conducive to subjective well-being or not. Possibly, this ambiguity is caused by cross-section models that do not account for unobserved cultural and institutional effects. Using the World Value Survey 1980-2005, this paper supports a positive relation in a country panel framework that accounts for unobserved, time-invariant country heterogeneity. This study also shows that using supra-national region dummies (by geography or language) in a country-random effects model appears to be a sufficient substitution for omitted country fixed effects.

• Item Type: MPRA Paper
• Language: English
• Keywords: Happiness; life satisfaction; subjective well-being; quality of life; institutions; democracy; rule of law; political constraints; policy implications; panel econometrics
• Subjects: H - Public Economics > H1 - Structure and Scope of Government > H10 - General; H - Public Economics > H4 - Publicly Provided Goods > H40 - General; I - Health, Education, and Welfare > I3 - Welfare, Well-Being, and Poverty > I31 - General Welfare, Well-Being; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C52 - Model Evaluation, Validation, and Selection; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C33 - Panel Data Models ; Spatio-temporal Models

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