NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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The Effects of Income Transparency on Well-Being: Evidence from a Natural Experiment

Ricardo Perez-Truglia

NBER Working Paper No. 25622
Issued in February 2019, Revised in September 2019
NBER Program(s):Labor Studies, Public Economics, Political Economy

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. We test this hypothesis using survey data from 1985–2013. Using multiple identification strategies, we show that the higher transparency increased the gap in happiness between richer and poorer individuals by 29%, and it increased the life satisfaction gap by 21%. We provide suggestive evidence that some, although probably not all, of this effect relates to changes in self-perceptions of relative income. We provide back-of-the-envelope estimates of the importance of income comparisons, and discuss implications for the ongoing debate on transparency policies.

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Document Object Identifier (DOI): 10.3386/w25622

Published: Ricardo Perez-Truglia, 2020. "The Effects of Income Transparency on Well-Being: Evidence from a Natural Experiment," American Economic Review, vol 110(4), pages 1019-1054. citation courtesy of

 
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