Climate change, income and happiness: An empirical study for Barcelona

The present article builds upon the results of an empirical study exploring key factors which determine life satisfaction in Barcelona. Based on a sample of 840 individuals we first look at the way changes in income, notably income reductions, associated with the current economic situation in Spain, affect subjective well-being. Income decreases which occur with respect to one year ago have a negative effect on happiness when specified in logarithmic terms, and a positive one when specified as a dummy variable (and percentage change). The divergence in results is discussed and various explanations are put forward. Both effects are however temporary and do not hold for a period longer than a year, probably for reasons of adaptation and a downward adjustment of reference consumption and income levels. Next, we examine the implications of experiencing forest fires and find a lasting negative effect on life satisfaction. Our results suggest that climate policy need not reduce happiness in the long run, even when it reduces income and carbon-intensive consumption. Climate policy may even raise life wellbeing, if accompanied by compensatory measures that decrease formal working hours and reference consumption standards, while maintaining employment security. (C) 2013 Elsevier Ltd. All rights reserved.