BY: ROBERT MACCULLOCH
London School of Economics & Political Science
(LSE)
Department of Economics
RAFAEL DI TELLA
Harvard Business School
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=267362
Paper ID: Harvard Business School Working Paper Series 2000
Date: April 7, 2000
Contact: ROBERT MACCULLOCH
Email: Mailto:robertmacculloch at compuserve.com
Postal: London School of Economics & Political Science (LSE)
Department of Economics
Houghton Street
London WC2A 2AE, UK
Phone: +44 20 7955 6960
Fax: +44 20 7955 6951
Co-Auth: RAFAEL DI TELLA
Email: Mailto:rditella at hbs.edu
Postal: Harvard Business School
Morgan Hall 283
Soldiers Field
Boston, MA 02163 USA
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ABSTRACT:
We use data on the subjective well-being of more than a quarter
of a million people living in the OECD over the period 1975-92
to study the behavior of partisan social happiness functions.
Controlling for personal characteristics of the respondents,
year and country fixed effects and country specific time trends,
we find that the data describe social happiness functions for
left-wing and right-wing individuals where inflation and
unemployment enter negatively. We use these functions to test
the root assumption of partisan business cycle models where
left-wing individuals care more about unemployment relative to
inflation than right-wingers. Bootstrap confidence intervals
suggest that up to 90 per cent of the time the evidence is
consistent with this assumption. Interestingly, we find that it
is misleading to assume that the poor (rich) behave similarly to
the left (right). For example, the poor are hurt more by
inflation than the rich, while the left are hurt less. Finally,
we find that individuals declare themselves to be happier when
the party they support is in power, even after controlling for
economic variables. Our findings are hard to explain using
median voter models but are to be expected in a partisan world.
Keywords: Median Voter, Partisan Business Cycles, Subjective
Well-Being