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«IZA DP No. 8764 PAPER Voluntary Activities and Daily Happiness in the US J. Ignacio Gimenez-Nadal DISCUSSION Jose Alberto Molina January 2015 ...»

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SERIES

IZA DP No. 8764

PAPER

Voluntary Activities and Daily Happiness in the US

J. Ignacio Gimenez-Nadal

DISCUSSION

Jose Alberto Molina

January 2015

Forschungsinstitut

zur Zukunft der Arbeit

Institute for the Study

of Labor

Voluntary Activities and Daily Happiness

in the US

J. Ignacio Gimenez-Nadal

University of Zaragoza

and CTUR

Jose Alberto Molina

University of Zaragoza

and IZA

Discussion Paper No. 8764 January 2015 IZA P.O. Box 7240 53072 Bonn Germany Phone: +49-228-3894-0 Fax: +49-228-3894-180 E-mail: iza@iza.org Any opinions expressed here are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but the institute itself takes no institutional policy positions.

The IZA research network is committed to the IZA Guiding Principles of Research Integrity.

The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public.

IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion.

Citation of such a paper should account for its provisional character. A revised version may be available directly from the author.

IZA Discussion Paper No. 8764 January 2015

ABSTRACT

Voluntary Activities and Daily Happiness

–  –  –

This paper analyzes differences in daily happiness between those individuals in the United States who perform voluntary activities during the day, and those who do not. Using the WellBeing Module of the American Time Use Survey 2010, we initially find that those who devote any time to voluntary activities during the day report higher levels of daily happiness than those who do not. Comparing the happiness obtained from a range of activities, we find that volunteering is among the most enjoyable, indicating that time spent on voluntary activities is utility-enhancing. But when the issue of reverse causality is taken into account, we find no differences in daily happiness between volunteers and non-volunteers, which indicates that happier individuals are also more likely to volunteer. We document that the effect of voluntary activities on the experienced utility of individuals can be decomposed into a “timecomposition” effect and a “personality” effect, with the latter explaining between 11% and 46% of the observed difference.

JEL Classification: D13, J16, J22 Keywords: voluntary activities, time use survey, experienced utility

Corresponding author:

Jose Alberto Molina Department of Economic Analysis Faculty of Economics University of Zaragoza Gran Vía 2 50005 Zaragoza Spain E-mail: jamolina@unizar.es * We are very grateful for helpful comments from Jon Bakija, Bram de Brock, Andrew Clark, Donald Cox, Dan Hamermesh, Andreas Knäbe, Eric Maurin, Alois Stutzer, Yu Zhu, and participants in the Workshop “Frontiers of Time Use Research” (Paris, 2014). This paper was partially written while Jose Alberto Molina was Visiting Fellow at the Department of Economics of Boston College (US), to which he would like to express his thanks for the hospitality and facilities provided. This paper has benefited from funding from the Spanish Ministry of Economics (Project ECO2012-34828).

1. Introduction We analyze here the relationship between voluntary activities and the happiness obtained throughout the day by individuals in the US, which has a long tradition of community service and continues to lead other Western countries in volunteering. American adults are more than twice as likely as German and French adults to contribute time and energy to community work (Ladd, 1999; Putnam, 2000), and participation in voluntary activities has increased in recent years (US BLS 2013a). Voluntary activity is a significant economic activity in the US.

Americans aged 15 and older spent 2.5 hours, on average, doing formal and informal volunteering on days that they volunteered, with between 6% and 8% of the US population volunteering on any given day, over the period 2007-2011 (US BLS 2013b). Volunteering plays a prominent role in the charitable provision of goods and services, and it is often regarded as being fundamental to the sustainability of any society. Hence, the factors and/or motives behind individual philanthropic behavior are worth analyzing, as a deeper understanding of charitable donations of time could help economists and policy-makers anticipate behavioral responses to changes in economic fundamentals.

Among the different hypotheses as to why individuals devote time to voluntary activities, one basic idea is that it increases the utility of individuals (Becker, 1974; Andreoni, 1989;1990).





The literature on the determinants of happiness (or Subjective Well-Being, SWB) has studied the factors that make individuals happier, with some studies showing that volunteering is positively related to individual SWB (Dolan, Peasgood and White, 2008; Meier and Stutzer, 2008; Binder and Freytag, 2013). 1 But many of the studies are correlational, and the causal relationship between volunteering and happiness must be approached with caution. In this paper, we take an alternative approach, and we examine the happiness obtained by individuals during their daily activities. 2 Within this framework, we compare the daily happiness obtained by individuals who do, or do not, devote time to voluntary activities. To that end, we use the sample of individuals from the Well-Being Module of the 2010 American Time Use Survey (ATUS), which provides information on individual time use, based on diary questionnaires, in which individuals report their activities throughout the 24 hours of the day, as well as information on the feelings individuals experience during their time-use activities.

We use two measures of daily happiness that have been proposed in the literature, and regress them on an indicator of whether the diarist reported some time spent on voluntary activities during the day of the interview. We find that those who devote any time to voluntary activities during the day report obtaining a higher level of happiness than those who do not See Dolan, Peasgood and White (2008) and Binder and Freytag (2013) for a review of the factors correlated with volunteering and SWB.

This concept refers to the “experienced utility”, as used by Kahneman et al. (1997), who defines it as a ‘continuous hedonic flow of pleasure or pain’.

devote such time. These results are maintained when we exclude episodes of voluntary activity from the analysis. We further propose an Instrumental Variable strategy to deal with reverse causality e.g., happier individuals could be more likely to participate in voluntary activities.

Using the cross-state variations in laws regarding deductions for charitable contributions as our main instrument, we find that voluntary activities have no effect on the daily happiness of volunteers, indicating that happier individuals are more likely to participate in voluntary activities.

We also follow Knabe et al. (2010) and decompose the difference in the daily happiness between volunteers and non-volunteers into two components: a “time-composition” effect and a “personality” effect. The former captures the difference in daily happiness that can be attributed to differences in the distribution of activities during the day. To the extent that different activities provide different levels of individual experienced utility, the difference in the experienced utility between volunteers and non-volunteers could be explained because those who devote time to volunteer activities may differ in how they spend their time, compared to those who do not volunteer. Such differences in the distribution of activity time include voluntary activities that are shown to be ranked among the five most enjoyable activities, consistent with prior studies. For instance, Krueger (2007) analyzes data on experienced utility in the US and classifies the “general voluntary acts” in the group of “the most enjoyable and interesting activities”. Kahneman et al. (2004), Krueger et al. (2009) and White and Dolan (2009) also show that voluntary activities are positively related to happiness.

The latter study captures the variations in daily happiness obtained while engaged in similar activities. It could be that volunteers and non-volunteers report different levels of daily happiness when engaged in the same activities during the day, which could explain the observed differences between the two groups. Such differences are defined at the individual level, as they depend on inter-personal differences in same activities, and we call this the “personality” effect.

The “personality” effect explains between 11% and 46% of the differences in happiness between volunteers and non-volunteers during the day.

We contribute to the literature by examining the relationship between voluntary activities and the happiness of individuals (Thoits and Hewitt, 2001; Greenfield and Marks, 2004;

Brooks, 2006; Borgonovi, 2008; Dolan, Peasgood and White, 2008; Meier and Stutzer, 2008;

Binder and Freytag, 2013), by offering a novel analysis of how voluntary activities affect the daily happiness individuals obtain during the day. We initially find that those who volunteer report higher levels of daily happiness, but this difference dissapears when the reverse causality issue is taken into account. This work complements prior analyses on how voluntary labor relates to subjective well-being, but, while other studies have used retrospective questions on happiness or well-being, aimed at measuring happiness in the long-run, our approach focuses on the short-run. Thus, whereas traditional SWB measures refer to “life as you remember it”, we concentrate here on “life as you live it”. Our second contribution is the use of cross-state variations in deductions for charitable contributions as an instrument to deal with the possible reverse causality of volunteering and happiness, given that the majority of existing studies are correlational, with only a few exceptions dealing with the issue of reverse causality. Our third contribution lies in the decomposition of the difference in daily happiness between the two groups into two components with, to the best of our knowledge, only Knabe et al. (2010) having done anything similar.

The rest of the paper is organized as follows. Section 2 presents a review of the most relevant literature for the current study. Section 3 describes the data and variables. Section 4 analyzes initially the relationship between voluntary activities and happiness, and Section 5 examines possible channels through which happiness and volunteering could be related. Section 6 shows the relevant results when the issue of reverse causality is taken into account, and Section 7 shows the decomposition of the difference in daily happiness between the “timecomposition” and “personality” effects. Section 8 sets out our main conclusions.

2. Literature Review Volunteering can be broadly defined as “any activity in which time is given freely to benefit another person, group or organization” (Wilson, 2000, pp. 215). In Economics, explanations of the philantrophic behavior of individuals vary. One of these is the straightforward utilitymaximization model, where donors obtain tangible benefits, in line with the basic notion of a rational “homo-economicus”. If we relax the utility-maximization assumption, giving may take place when individuals are interested in the well-being of others, leading to the “pure altruism model” (e.g., Becker, 1974; Unger, 1991; Duncan, 1999), or it may take place when donors derive benefit from the act of giving, leading to the “impure altruism” or “warm glow” model (Andreoni, 1989;1990; Rose-Ackerman, 1996). The “investment model” considers that volunteering may enable individuals to accumulate human capital, expand networks, signal productive characteristics to firms, or acquire contacts that can help in the future (e.g., Menchik and Weisbrod, 1987; Freeman, 1997, Wilson, 2012). Hence, the consumption motive is associated with the first three explanations, as there are direct increases of the contemporaneous utility of individuals from volunteering, and the investment motive considers an indirect increase in future utility. Menchik and Weisbrod (1987) analyze each of these motives and conclude that both play an important role in the decision to volunteer, although Freeman (1997) fails to confirm the importance of the consumption motive.

Several positive outcomes have been proposed as being associated with volunteering, including increased health (Post, 2005) and well-being (see Dolan, Peasgood and White, 2008, for a review). Volunteering has also been seen as positively related to the subjective well-being of volunteers (Helliwell, 2003; Helliwell and Putnam, 2004; Post, 2005; Brooks, 2006; Pichler, 2006; Becchetti et al., 2008; Borgonovi, 2008; Dolan, Peasgood and White, 2008). However, very few of these studies take into account issues of reverse causality (people volunteer more when they are happy) and simultaneity biases (some third factor, such as religion, leads to more volunteering and to more happiness). Meier and Stutzer (2008) find that the impact of volunteering is considerably reduced when fixed effects are controlled for, and only volunteering weekly remains significant, suggesting that the higher levels of well-being arise from individual heterogeneity. Binder and Freytag (2013) apply matching estimators and find that the impact of regular volunteering on SWB is positive and increasing over time when regular volunteering is sustained. Others have found that volunteering is negatively related to subjective well-being (Li, Pickles and Savage, 2005; Bjørnskov, 2003).



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