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Have Econometric Analyses of Happiness Data Been Futile? A Simple Truth About Happiness Scales

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Document pages: 23 pages

Abstract: Econometric analyses in the happiness literature typically use subjectivewell-being (SWB) data to compare the mean of observed or latent happinessacross samples. Recent critiques show that comparing the mean of ordinal datais only valid under strong assumptions that are usually rejected by SWB data.This leads to an open question whether much of the empirical studies in theeconomics of happiness literature have been futile. In order to salvage some ofthe prior results and avoid future issues, we suggest regression analysis ofSWB (and other ordinal data) should focus on the median rather than the mean.Median comparisons using parametric models such as the ordered probit and logitcan be readily carried out using familiar statistical softwares like STATA. Wealso show a previously assumed impractical task of estimating a semiparametricmedian ordered-response model is also possible by using a novel constrainedmixed integer optimization technique. We use GSS data to show the famousEasterlin Paradox from the happiness literature holds for the US independent ofany parametric assumption.

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