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Free keywords:
Subjective well-being, social comparison, tunnel effect, economic growth
Abstract:
We find evidence that individuals' subjective well-being depends on the macroeconomic performance of other countries as well as that of their home country. Given the home country's economic growth, an individual's life satisfaction is positively associated with the economic growth of important trade partners. It is negatively associated with the economic growth of neighboring countries that engage in relatively little trade with the home country. Our findings are consistent with individuals who care about their economic situation relative to that of people in other countries, but who at the same time anticipate positive spillovers from the economic performance of countries that share an important economic tie with their home country.
