Saturday, October 25, 2008

Economic Recessions and Well-Being

I mentioned in an earlier post some literature that argued that recessions might have some beneficial health effects in areas such as heart attacks, traffic accidents etc.,

I have been looking through the literature for papers that specifically deal with the effect of recessions on well-being. i am working on various projects this weekend and will post sporadically on these topics.

The review below by Blanchflower and several other papers point to a negative effect of unemployment on well-being both at individual and aggregate level.The paper by Wolfers below shows that both unemployment and inflation lower well-being and also finds an effect of volatility with more volatility independently lowering well-being. In general, I have not come across papers that argue against a causal effect of unemployment on well-being but would be interested to read any if I have missed them.

Wolfers, Justin, 2003. "Is Business Cycle Volatility Costly? Evidence from Surveys of Subjective Well-Being," International Finance, Blackwell Publishing, vol. 6(1), pages 1-26, Spring. [Downloadable!] (restricted)

David G. Blanchflower, 2008. "International evidence on well-being," NBER Working Papers 14318, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)

In terms of the effects of economic fluctuations, the relationship between gdp and well-being is still being debated strongly. Recent papers by Wolfers have argued against the Easterlin paradox, which claimed to demonstrate that economic progress beyond a certain point did not raise well-being.

Betsey Stevenson & Justin Wolfers, 2008. "Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox," NBER Working Papers 14282, National Bureau of Economic Research

While the debate might be shifting toward the side of gdp being a positive influence on well-being, the literature on suicide and gdp, in my opinion, is certainly not conclusive. In the Irish case, one only has to look at the last 20 years to know that suicide need not reduce during dramatic economic improvements and was, in fact, increasing at its highest rate in Ireland at the time of the most dramatic improvements in economic conditions we had witnessed. This is something that needs to be explained further.

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