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  4. April 2020
  5. The Effects of Income Transparency on Well-Being: Evidence from a Natural Experiment

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

The Effects of Income Transparency on Well-Being: Evidence from a Natural Experiment

  • Ricardo Perez-Truglia
American Economic Review
vol. 110, no. 4, April 2020
(pp. 1019–54)
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Abstract

In 2001, Norwegian tax records became easily accessible online, allowing everyone in the country to observe the incomes of everyone else. According to the income comparisons model, this change in transparency can widen the gap in well-being between richer and poorer individuals. Using survey data from 1985–2013 and multiple identification strategies, we show that the higher transparency increased the gap in happiness between richer and poorer individuals by 29 percent, and it increased the life satisfaction gap by 21 percent. We provide back-of-the-envelope estimates of the importance of income comparisons, and discuss implications for the ongoing debate on transparency policies.

Citation

Perez-Truglia, Ricardo. 2020. "The Effects of Income Transparency on Well-Being: Evidence from a Natural Experiment." American Economic Review, 110 (4): 1019–54. DOI: 10.1257/aer.20160256

Additional Materials

JEL Classification

  • D31 Personal Income, Wealth, and Their Distributions
  • H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
  • I31 General Welfare; Well-Being
  • K34 Tax Law