IV. Happiness Data, Macroeconomics and the Cost of a Recession
The first hypothesis to be tested is whether macroeconomic movements feed through into
people’s feelings of well-being. A second task is to calculate the size of any effects. In
order to put a value on recessions and booms, the paper compares the marginal effect of
income on happiness with the marginal effect of an unemployment upturn on happiness.
In other words, it calculates the marginal rate of substitution between GDP and
unemployment.