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Happiness, Economics and Politics

Happiness, Economics and Politics

Towards a Multi-Disciplinary Approach

Edited by Amitava Krishna Dutt and Benjamin Radcliff

This timely and important book presents a unique study of happiness from both economic and political perspectives. It offers an overview of contemporary research on the emergent field of happiness studies and contains contributions by some of the leading figures in the field.

Chapter 9: Perceptions of Discrimination, Effort to Obtain Psychological Balance and Relative Wages: Can we Infer a Happiness Gradient?

Arthur Goldsmith

Subjects: economics and finance, economic psychology, history of economic thought


9. Perceptions of discrimination, effort to obtain psychological balance, and relative wages: can we infer a happiness gradient? Arthur Goldsmith* OVERVIEW 1 There is ample evidence that blacks receive lower wages than whites with comparable characteristics and background (Altonji and Blank, 1999; Couch and Daly, 2002; Darity and Mason, 1998; Goldsmith et al., 2006a; Mason 1997). Estimates of the racial wage gap for males typically range between 12–15 percent.1 Social psychologists report that relative income is an important determinant of happiness or well-being. Thus, to the extent that black workers face wage discrimination there is likely to be an associated gap in well-being. This chapter offers, and tests, a theory of how a person’s perception that they face workplace discrimination influences their behavior, and hence, their wages. The theory is developed by extending the neoclassical theory of wage determination to incorporate the insights of Festinger’s (1957) theory of cognitive dissonance – one of the most innovative and prominent theories of behavior in social psychology.2 Our model advances the notion that workers simultaneously derive satisfaction from both the wage they earn and from being in psychological balance which is governed by a perception of ‘fair’ treatment. We interpret Festinger as asserting that thoughts or cognitions that do not ‘fit’ together, result in dissonance and that thoughts must be largely consistent for a person to attain psychological balance. In our view, a person who believes they face wage discrimination is thrust into an unbalanced psychological state since they think they are not...

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