17/10/15: ‘Dream Wedding’ Fairy Tales

Working through some papers, I just came across this now nearly classic, but still recent study that I wanted to share with you ages ago, but somehow forgot. So here it is - a brilliant example of empirical economics at its most interesting edge:

The paper evaluates “the association between wedding spending and marriage duration using data from a survey of over 3,000 ever-married persons in the United States.”

Stats informing this study objective are frightening: “In 2014, wedding industry revenues are projected to exceed $50 billion in the United States. According to a national survey conducted annually by the top wedding website TheKnot.com, the average wedding cost was $29,858 in 2013… In 1959, Bride’s recommended that couples set aside 2 months to prepare for their wedding and published a checklist with 22 tasks for them to complete. By the 1990s, the magazine recommended 12 months of wedding preparation and published a checklist with 44 tasks to complete.” Presumably, humanity lost count of months and tasks required to execute a fairytale wedding since then. But, “in 2012, total expenditures on diamond rings were roughly $7 billion in the United States.”

But is any of this ‘happiness industry’ working? “Overall, we find little evidence that expensive weddings and the duration of marriages are positively related. On the contrary, in multivariate analysis, we find evidence that relatively high spending on the engagement ring is inversely associated with marriage duration among male respondents. Relatively high spending on the wedding is inversely associated with marriage duration among female respondents, and relatively low spending on the wedding is positively associated with duration among male and female respondents. Additionally, we find that having high wedding attendance and having a honeymoon (regardless of how much it cost) are generally positively associated with marriage duration.”

Per authors summary: “The wedding industry has consistently sought to link wedding spending with long-lasting marriages. This paper is the first to examine this relationship statistically. We find that marriage duration is either not associated or inversely associated with spending on the engagement ring and wedding ceremony.” Or in other words, you might be able to buy your way into marriage, but you are unlikely to buy your way into a happy union.


Full paper: Francis, Andrew M. and Mialon, Hugo M., ‘A Diamond is Forever’ and Other Fairy Tales: The Relationship between Wedding Expenses and Marriage Duration (September 15, 2014): http://ssrn.com/abstract=2501480. Note, the paper has been since published in the Economic Inquiry (Volume 53, Issue 4, pages 1919–1930, October 2015).

3/09/2011: Returns to Beauty

A fascinating study by Daniel S. Hamermesh and Jason Abrevaya, titled "BEAUTY IS THE PROMISE OF HAPPINESS?" was released yesterday by the NBER (Working Paper 17327 http://www.nber.org/papers/w17327). This is, folks, economics at its best: great question, great analysis and something that is way more relevant to life than banks, property and/or Obama's administration again blasting through the debt ceiling (oh yeah, they did that this week too - here).

Here's what I am talking about: "We measure the impact of individuals’ looks on life satisfaction/happiness. Using five data sets, from the U.S., Canada, the U.K., and Germany, we construct beauty measures in different ways that allow placing lower bounds on the effects of beauty. Beauty raises happiness: A one standard-deviation change in beauty generates about 0.10 standard deviations of additional satisfaction/happiness among men, 0.12 among women. Accounting for a wide variety of covariates, particularly effects in the labor and marriage markets, including those that might be affected by differences in beauty, the impact among men is more than halved, among women slightly less than halved."

"There are two main general mechanisms through which people’s looks could affect their satisfaction/happiness. The first is through the many channels that have been shown in the beauty literature to offer routes by which beauty affects economic outcomes. These indirect effects may be at least as important as the direct effects of beauty on satisfaction/happiness — the halo that good looks might impart to a person independent of the effects of beauty on any market-related outcomes. In the main economic exercise in this study, ...we decompose any measured impact of beauty on satisfaction/happiness into its direct and indirect components and thus examine the extent to which any beauty-happiness relation works through markets."

Hence, "The main economic question in this study is whether the effect of beauty on
satisfaction/happiness works through markets:

• How much of the effect is direct—with people who are otherwise identical in every respect being happier/more satisfied than their less good-looking peers?
  
• How much is due to the fact that beauty enhances one’s outcomes in various markets, including the labor and marriage markets?"

And here are the conclusions: "Taking the results at face value suggests that roughly half of the gross effect of looks works through the marriage and labor markets". However, "the available data do not allow us to account for impacts in other markets. As just one example, there is growing evidence that beauty confers benefits on good-looking borrowers in lending markets... Moreover, our proxies for the outcomes in the labor and marriage markets that are affected by beauty are far from perfect. It thus seems fair to conclude that the expanded estimates suggest that the direct effect of beauty is at most one-half of the total effect, and perhaps much less. The majority of the impact of beauty on satisfaction/happiness appears to be economic—through its effects on outcomes in various markets."

Yep, being beautiful pays. And hence, investing in beauty is a big business.

One other interesting point - notice that men-women differential in 'returns' to beauty are 0.1:0.12 - not exactly a massive one. "The results ...show only slightly greater gross effects of beauty among women than among men. The direct effects, however, are larger among women, with relatively less of the impact of beauty on women’s satisfaction/happiness working through markets. This gender difference may explain why, although most of the studies measuring the impact of beauty on earnings find larger effects among men than among women, laypeople believe that looks matter more to women."

I will have to add this to my reading lists for Investment Analysis and Economic Risk courses... Simply brilliant!

15/01/2011: Family and siblings achievements

Correlations in achievement between siblings in general reflect the impact of family and community on individual outcomes. More importantly, since the siblings achievements are contemporaneous, these correlations can tell us much more about social and family effects than intergenerational correlations, since the latter effects are clearly a function of constantly changing circumstances.

An interesting paper from Swedish researchers (What More Than Parental Income, Education and Occupation? An Exploration of What Swedish Siblings Get from Their Parents, by Anders Björklund, Lena Lindahl, and Matthew J. Lindquist – available here) looked at the determinants of siblings performance in terms of future earned income.

Estimates of such siblings-linked correlations in income, per Björklund et al show that more than half of the family and community influences shared by siblings are independent of parental income. This is a powerful result as it suggests that:

• within-family and within-social group factors determining the outcomes for siblings are more important than much-talked about income poverty; and
• positive effects of the family on raising children can potentially partially (but with strong effect) offset adverse effects of income poverty.

“Measures of family structure and social problems account for very little of sibling similarities beyond that already accounted for by income, education and occupation.” In other words, it appears that the measured aimed at directly influencing the actual form of the family structure (a traditionalist family focus etc) and the core social welfare policy instruments (policies aimed at alleviating social disadvantages) hold little promise in enhancing future performance of children beyond the already recognized income and education components.

Unless, that is, these policies are incentivising more parental inputs into raising children: “…when we add indicators of parental involvement in schoolwork, parenting practices and maternal attitudes, the explanatory power of our variables increases from about one-quarter (using only traditional measures of parents’ socio-economic status) to nearly two-thirds.”