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The Journal of Socio-Economics 39 (2010) 81–88

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The Journal of Socio-Economics
journal homepage: www.elsevier.com/locate/soceco

Real household income and attitude toward immigrants: an empirical analysis
Leonardo Becchetti a,∗ , Fiammetta Rossetti a , Stefano Castriota b
a b

University of Tor Vergata, Rome EURICSE, Trento, Italy

a r t i c l e

i n f o

a b s t r a c t
Previous studies have analyzed the (aggregate) effects of unemployment on attitudes towards immigrants and on right-wing crimes. In this paper, we investigate the effects of economic prosperity on attitudes towards immigrants, focusing not only on unemployment status but also on real household income. Using panel data from the German Socioeconomic Panel on around 33,000 individuals over the period 1992–2004 we find a robust negative relationship between real personal household income and self-declared concern about immigrants, both in levels and first differences. Both job loss and income reduction concerns about immigration. Our findings document an interesting interaction between economic variables and social attitudes which does not depend on economic growth per se but on its capacity to generate higher economic wellbeing at individual level, not only for unemployed people but also for those in employment, who may face a fall in real income during economic downturns. © 2009 Elsevier Inc. All rights reserved.

Article history: Received 15 December 2008 Received in revised form 25 June 2009 Accepted 22 July 2009 JEL classification: D64 I31 O15 Z13 Keywords: Social capital Morality Ethics Tolerance Immigration Household income

1. Introduction [I]t is in the progressive state, while the society is advancing to the further acquisition, rather than when it has acquired its full complement of riches, that the condition of the great body of the people, seems to be the happiest and the most comfortable. It is hard in the stationary, and miserable in the declining state. The progressive state is in reality the cheerful and the hearty state to all the different orders of society. The stationary is dull; the declining melancholy. Adam Smith, Wealth of Nations Evaluating the non-economic consequences of economic choices is extremely important for the correct definition of policy objectives. In fact, moral values, social attitudes and individual preferences are crucially oriented by the former. Many theoretical and empirical studies highlight that economic outcomes affect values, or that the same market structure and economic growth may produce alternative cultural values (such as antagonism and selfinterest) as side products, thereby interacting with “civic virtues” and helping to strengthen or deplete the moral fabric.

In this regard, two opposite theoretical schools of thought maintain that economic growth has respectively positive or negative consequences on moral values. A first argument emphasizing the negative consequences of economic growth on moral values is the well-known trade-off between comfort and stimulation (Scitowsky, 1976), where affluence generated by economic growth increases individual comforts. This, in turn, dampens incentives to build those values and virtues which require effort to be maintained and strengthened. A second argument has been put forward by Hirsch (1976) who holds a well-known critical position on the moral consequences of market economy and economic growth. In his book entitled Social Limits to Growth, Hirsch identifies three main negative effects of market economies on moral values: the “tyranny of small decisions”, the “commercialization bias”, and the “depleting moral legacy”. The first is related to the classical coordination failure problem.1 The second refers to a typical Marxian argument which holds that in a free market economy everything, including moral values, becomes the object of exchange, generating

∗ Tel.: +39 06 36300723; fax: +39 06 2020500. E-mail address: Becchetti@economia.uniroma2.it (L. Becchetti). 1053-5357/$ – see front matter © 2009 Elsevier Inc. All rights reserved. doi:10.1016/j.socec.2009.07.012

1 “Individual choices, each made separately and thereby necessarily without taking account of the interaction between them, combine to have destructive social consequences. These consequences are destructive in the sense that they produce a worse result for the individual concerned than could have been obtained by coordination of individual choices with some method that took account of the mutual interaction.” (Hirsch, 1976, p. 37).

our original contribution being the analysis of the effect of changes in real income on attitudes towards immigrants. while the negative effects determined by Fertig and Schmidt (2002) become insignificant in the structural model. a significant share of the population registers a fall in family income. own and parents’ education. are characterized by negative values like individualism and avarice. (ii) questions related to the labor-market impact of foreigners. The distribution of self-declared concern about foreigners. who assumed that the character’s structure is influenced by the environment where a person has grown up: economic and social background. Friedman’s contention has a sound economic rationale. Intuitively. Market economies. 2005). 2000). even in a zero growth economy. the overall population’s wellbeing is unchanged. the nature itself of market transactions is such that. given that studies on individual attitudes have not demonstrated a clear positive relationship between unemployment and resentment against immigrants. the most damaged in relative terms are those who become unemployed. it is reasonable to assume that such worry is higher in stagnation periods. and the economic situation.82 L. which may make natives perceive immigrants as a threat to their employment situation or economic welfare. if both per capita GDP and people’s expectations increase by the same amount. tolerance of diversity. among others. The research was conducted in the 1940s in the United States by Adorno et al. / The Journal of Socio-Economics 39 (2010) 81–88 corruption and venality and deteriorating the society’s moral fabric. which deplete that legacy. During economic downturns. People’s attitudes are the results of individual inherited traits. (2000) using ISSP data. commitment to fairness and dedication to democracy. social mobility. Furthermore. mobility of workers. Thirdly. the number of immigrants present in a certain region. 1. If the zero sum game is a crucial cause of worry. Our purpose in what follows is to shed more light on this muchdebated issue. even under constant GDP. age. who explain the factors determining individuals’ opinions in regard to future immigration. A large part of public opinion believes that economic activity is a zero sum game in which the aggregate payoffs of losers and winners must necessarily be clear. without considering the role played by real household income. the only way to increase one’s satisfaction is by increasing one’s relative income.” And conversely. Therefore. have a larger slice of it. and by Bauer et al. relative income and hedonic adaptation may make economic activity a zero sum game even in the presence of growth. using data from the Eurobarometer on several European countries over the period 1988–1997. According to Friedman. 2005). An opposite school of thought challenges this view by emphasizing that economic growth has also beneficial consequences in terms of higher tolerance and openness (Friedman. market trades increase individual wellbeing in proportion to the sum of consumer and producer surpluses. whereas labor market or welfare considerations are less decisive factors. thereby depleting the society’s moral fabric.4 From an empirical viewpoint. Gang and Rivera-Batiz (1994) found that students have the most positive attitudes and retired people the most negative ones. Age is another important driver of attitudes towards foreigners: using data on Germany from the 1988 wave of the Eurobarometer. are considered the most influential factors in the personality’s development. (2000). 2001b). 1976. However. Becchetti et al. a change in the share of investment may be crucial for raising the growth rate in the future.. Dustmann and Preston find that racist attitudes constitute the main determinant of opposition against future immigration. Gang et al. These latter may express their frustration not through violent actions but rather through democratic votes in favor of less tolerant political parties. family background and education. a number of works have studied the determinants of tolerance towards immigrants. there being less tolerance. . The role of background was highlighted by one of the first studies in this field. Gang et al. social morality is a “legacy of the precapitalist and preindustrial past” (Hirsch. Fig. no effect of unemployment on tolerance was found by Bauer et al. this is true only when the GDP growth rate is non-positive. while studies on the role of real income are lacking (Falk and Zweimueller. and the like. less openness. from an algebraic point of view. In fact. when there is economic stagnation or decline the citizen’s “moral character” tends to decline accordingly. find that negative attitudes are affected by the degree of competition in the labor market with immigrants. which states that the total energy going into a system must equal the total energy coming out of it. 2002). and by negative social framework due to anonymity. Clearly. but also by many other individuals. Negative effects of unemployment on tolerance have been found with German data by Gang and Rivera-Batiz (1994) and Bacher (2001a. 3 This is true at least from a static point of view when it is not considered that. which can happen only is somebody else’s relative income diminishes. and so on. but an analysis of the effect of diminishing purchasing power is necessary. which is the original contribution that this paper seeks to make. 2000b. The relevance of mentality – as the product of inherited traits and cultural background – has been well described by Dustmann and Preston (2007). since in countries with a more skill-based immigration policy (e. by Fertig and Schmidt (2002) with German data. 117) which is necessary if economic transactions have to work. Tolerance is also influenced by the concentration of ethnic minorities in certain areas.3 than it is in expansion periods. The role of economic variables is still a source of debate. Canada) respondents tend to have a more positive attitude towards immigrants (Bauer et al. and less generosity to the poor and the disadvantaged”. (2002).2 In fact. By contrast. and cannot be created or destroyed. and by the immigration policies adopted by governments. and (iii) questions related to the impact of foreigners on the economy’s welfare.g. although they do not find any difference between employed and unemployed people. when economics is effectively a zero or a negative sum game in the aggregate. Falk and Zweimueller (2005) show that unemployment is a driver of right-wing extremist crimes which are committed mainly by young males. when the size of the “cake” grows and everyone can. p. The zero sum game argument is therefore valid only in a static perspective and if the focus is exclusively on observable economic payoffs. 2 The idea of economics as a zero sum game finds an analogy in the second law of thermodynamics on the conservation of energy. (1950). The importance of education for tolerance has been confirmed. but to our knowledge those analyzing the relevance of economic variables have focused on the unemployment status. because it increases the hostility of native respondents towards these groups (Dustmann and Preston. the immigration policies adopted by the government.. in principle. They use three types of question on the perception of foreigners by native respondents in the BSAS: (i) questions related to race. real household income drops are experienced not only by those who lose their jobs. 4 On translating our reasoning into terms of the happiness effects of material wellbeing. In fact. especially since industrialization. “Economic growth – meaning a rising standard of living for a clear majority of citizens – more often than not fosters greater opportunity.

The distribution of changes in self-declared concern about foreigners.L. Section 2 describes our database and comments on the descriptive evidence. Tolerance is harmony in difference. The paper is divided into four sections (introduction and conclusions included). less openness. The final dataset was the result of large-scale selection and redenomination of variables in order to render them homogeneous across survey years.626 observations. 1 shows the distribution of responses across the entire sample period. we consider only 13 waves. giving the variable a more intuitive interpretation also in the estimation results. 4 and 5 repeat the exercise for. Fig. This panel is unbalanced and covers the 1984–2004 period. The dataset used for the analysis is an unbalanced panel with 32. The additional data file that the GSOEP offers to integrate base survey data with more accurate information on household income and education was used to improve the quality of our information. Fig. and less generosity to the poor and the disadvantaged”. Note that variation in concern is quite marked and involves more than 40% of sample respondents (around 37% onerung changes and around 4% two-rung changes). 3. as “sympathy or indulgence for beliefs or practices differing from or conflicting with one’s own”. Dynamics of the share of respondents with the maximum level of concern about foreigners. Our dependent variable is based on the following question “What is your attitude towards immigration to Germany.”5 Although a single indirect question cannot capture the richness of the concept. Becchetti et al. from 1992 to 2004. In its “Declaration on the Principles of Tolerance” UNESCO defines tolerance as “respect. 4.880 different individuals for a total of 168. 3 shows the evolution across years of the share of individuals “Very Concerned” about foreigners for the overall sample and for German natives only: the aggregate level of concern appears to be quite stable over time. acceptance and appreciation of the rich diversity of our world’s cultures. 48% of them to be “Somewhat Concerned”. (ii) “Somewhat Concerned” and (iii) “Not Concerned At All”. we can argue that concern about migration is definitely related to the Friedman’s more general Fig. Fig. For a preliminary inspection of our dependent variable we calculated year-by-year transitions to different states of concern about 5 The Merriam Webster Dictionary defines tolerance. Section 3 presents and discusses the econometric findings from different specifications in which we regressed (changes of) self-declared concern about immigrants on (changes of) various measures of aggregate and individual socioeconomic conditions. 2. The dataset in its original form was organised into separated blocks of variables for each survey year. Dynamics of the share of respondents with the average level of concern about foreigners. Are you concerned about it?” for which the possible answers are: (i) “Very Concerned”. our forms of expression and ways of being human. 2. However. We rescaled this measure in order to have 3 for “Very Concerned” and 1 for “Not Concerned At All”. / The Journal of Socio-Economics 39 (2010) 81–88 83 Fig. . because the tolerance question on which we focus was added to the survey only in 1992. not very differently and more succinctly. we would point out that concern about immigrants is very likely to be negatively correlated with acceptance of cultural diversity. We observe that 23% of respondents declared themselves to be “Not Concerned At All”. statement which relates economic decline to “less tolerance. which forms the main part of the UNESCO definition. with similar results. Empirical analysis The data source for our empirical analysis is the German SocioEconomic Panel (GSOEP). while 29% were “Very Concerned”. More generally. Section 4 concludes. An important question is whether our variable is a good proxy for the concept of tolerance. the individuals “Somewhat Concerned” and “Not Concerned At All”. The dynamic panel was built by appending the 13 waves. however. respectively. Fig. Figs. 2 illustrates the distribution of changes in concern about immigration in the sample period.

with a 35% probability of passing from an extreme state to the intermediate one.D.24 0. and individuals losing their jobs with the highest level of concern is markedly greater than that of the overall sample. and below 10%. level of concern and change of level of concern.743 0.62 0. the underlying assumption being that people take time to react to changes in the macroeconomic situation. 1 for each year) Table 2 Descriptive statistics.626 against a total sample size of around 168. Repeating the calculations on changes in self-declared concern revealed (Table 5) that the average number of moves from not concerned at all to very concerned (highest to lowest level of tol- Mean 2. Variable Concern about foreigners Yearly change in concern about foreigners German nationality Age Male Education (in years) Married Separated Single Divorced Widowed Unemployed Loss of job in the current year Real household income GDP growth (3-year moving average) Inflation rate (3-year moving average) Unemployment rate (3-year moving average) Observed 168. whose causes should be investigated.07 0. while single status.407 2. In our regressions we control for gender.56 Min 1 −2 0 17 0 7 0 0 0 0 0 0 0 0 0.06 0.13 0. In Table 4.51).626 168. Much lower. and the average GDP growth rate is below 1. are the probabilities of a sudden change from one extreme to the other extreme state. Note that both levels and changes in real household income are significantly and negatively correlated with concerns about foreigners. but variability of the dependent variable for the same individual across years is not negligible. since this is measured at the individual level.45 17.71 0. Dynamics of the share of respondents with the minimum level of concern about foreigners.623 168. we generate a dummy variable (Loss of job) to take account of also negative variations in the employment status: the variable takes value 1 if a person lost his/her job in the given year and 0 otherwise. The main difference in the marital status variables is in the share of those with the lowest level of self-declared concern. higher education and income have a positive correlation with tolerance. 0.06 0.53 S.92 21. Table 3 shows the correlation between the two dependent variables of interest.48 11. Year t Year t − 1 Not Concerned At All Somewhat Concerned Very Concerned Not Concerned At All 55.834 91. we observe that the share of Germans. which are no longer significant).24 0. respectively. With regard to employment status we create a dummy variable (Unemployed) which is equal to 1 if an individual is unemployed in a given year and 0 otherwise. This implies that statistical inference from the effects of these variables is poor and that their coefficients in econometric estimates may be unstable (see Frey and Stutzer. As expected.43 0. persistence in a given level of self-declared concern is quite high (between 50 and 60% and higher in the intermediate response).626 168.28 57. inflation and unemployment because their variation in our sample is very limited (only 13 observations. Similar findings apply for the change in the level of concern (except for unemployment status and education.72 0. Data on GDP and unemployment are taken from Econstats and those on inflation from the IMF’s International Financial Statistics. Table 2 reports the list of variables considered in our regressions with corresponding summary statistics. while only the second variable is still negative and significantly correlated with changes in such concern.17 .02 17.268 160. education and marital status. being married.99 3.509 160.89 and 25.51 8.31 0.10 0. age. age.55 0. A problem arises when using macroeconomic data like GDP growth rates. and the set of control variables that we use in our regressions.10 Somewhat Concerned 35.26 0. Overall.626 132. the transition probabilities confirm that there is substantial variation of self-declared concern. Becchetti et al.21 1.74 0. 5.06 60. against 23.153 168.60 0.50 2. Tables 4 and 5 treat the issue from a slightly different perspective because they show the distribution of selected variables across changes in self-declared concern about immigrants.509 160. More relevant to the topic of this paper is that people with greater concern about foreigners declare lower real household incomes (the average monthly income for those with the highest level of concern is 2773 (1984) Dmarks.00 0.5%.983 145. Furthermore.51 0. The macroeconomic situation in our sample period is rather gloomy.49 0.87 9.14 0. In this regard. 2000).509 160.509 160.70. Among the possible macro variables we select the 3-year percent changes in the real per capita GDP at constant prices and the 3-year unemployment and inflation rates.24 0. singles and separated respondents exhibit a higher value than married ones (28. and unemployment status are positively correlated with the level of concern about immigration.03 2. Inspection of the first column shows that German nationality. Table 1 Transition matrix of one-year changes in respondent’s self-declared concern about foreigners.08 foreigners (see Table 1). and to use the macroeconomic variables mainly as a control in a subset of our specifications.047 161.83 7.02 0. For this reason we decide to rely more on the one-year percent change in real household income to test our hypothesis on the effects of growth on tolerance.626 164.03 Max 3 2 1 99 1 18 1 1 1 1 1 1 1 67.509 167.82 Very Concerned 9. nationality.89 35.99 6.84 L.760 168.06 0.900 1. married persons.72 45. / The Journal of Socio-Economics 39 (2010) 81–88 Fig. more than 200 Dmarks lower that that (2999 Dmarks) of those declaring the lowest level of concern).18 1.000 observations on the level of concern.

/ The Journal of Socio-Economics 39 (2010) 81–88 Table 3 Correlation of the level of concern and yearly changes in the concern about foreigners with selected variables.0077*** 0.53 44.0032 −0.32 31. Age and male gender have a positive effect on concern about foreigners.81 18.60 25.0214*** −0. Econometric findings The discrete qualitative nature of the dependent variable requires that we estimate the model with a (random effects) panel ordered probit approach.21 18. Those moving from the lowest to the highest level of concern register on average a real annual reduction of 2. loss of employment).52 2.89 22.0223*** p < 0. education.0032 −0.31 Note: All numbers refer to the percent distribution of selected variables.0053** Yearly change in concern about foreigners 1 0.10 19.0522*** −0.51 2 45. Being married.07 −3.22 2.1509*** 0.0169*** −0. Surprisingly.96 58.0118*** 0. while the model in first differences comprises only a subset of the variables (which are expected to affect also first differences) and no time trend. The use of first differences helps us disentangle the effects of life events from those of psychological traits inherited from childhood.56 21. 2004).81 49. divorced or unemployed increases the level of concern.97 18. The econometric estimates presented in the following section sought to solve these problems and to verify the significance of the correlations observed. Control variable Concern about foreigners in Germany −2 Male German nationality Married Separated Single Divorced Loss of job in the last year % (real household income) Total sample 2.09 1.43 57.86 2.42 1 18. 3.0285*** −0.0023 −0. and reverse causality may significantly blur the picture. for which we report the average change.52 29. among others. The positive sign is consistent with the hypothesis that higher levels of inflation correspond to a reduction in pur- Note: All numbers refer to the percent distribution of selected variables.L.82 21.0299*** 0.92 58.013*** 0.53 2.69 report on average an increase of 1.35 59.0468*** −0.1% and above the sample average.015*** 0.36 2.0417*** 0.79 45. The regressions in Table 6 seem to confirm the descriptive findings. p < 0. marital status.0016 0.39 2.28% in their monthly household income. nationality.79 3. employment status.0369*** 0.01 −1 18. Tables 4 and 5 present some evidence on the effect of selected variables on tolerance towards foreigners.66 58.5175*** 0.20 2929 47. Ravallion and Lokshin.45 29.70 28.83 2.80 3 30.83%. apart from the Real Household Income. The model in levels includes the full set of regressors and a time trend. there is an evident negative correlation between the change in real household income and the change in the level of concern about foreigners. p < 0.05.27%). apart from the % (real household income).79 44. but it can also be determined by fixed characteristics which are generally modeled as time-invariant individual intercepts in panel data (fixed effects).61 18.0666*** −0.0684*** 0.0477*** 0.0163*** 0. inflation and the unemployment rate).81 18.45 18.1.27 18. 2002.46 2 2.005* −0. which is 20.38 18.73 48.69 25.91 34. We estimate the model both in levels and first differences. erance) was very low (on average 2. Furthermore. inflation and unemployment rates are both significant and have the expected sign.52 −1.06 18. The findings just described are obviously non-conclusive because composition effects.3%) but became higher for those respondents who had lost their jobs (3.32 19. .0027 −0. inherited traits. By first differencing our specification we eliminate the fixed effects from the model (for a similar approach see.65 2773 28.80 0 58.70 45. while higher income and education levels have the opposite effect. With regard to macro variables. Concern about immigrants is affected by economic or family shocks. the real household income and some aggregate macroeconomic variables (GDP growth.23 2.30 18. negative family shocks seem to be associated with a reduction in concern about foreigners.17 2. and Ferrer-i-Carbonell and Frijters.14 2. Table 4 Percent distribution of selected variables across levels of self-declared concern about foreigners.0025 0. The independent variables we select included various socio-economic individual controls (gender.0056** 0.46 17.0014 0.0042 −0. although the effect becomes statistically not significant when only native Germans are considered.42 17.62 −2.27 −2.52 1.22 56.28 2. Variable Yearly change in concern about foreigners German nationality Age Male Education (in years) Married Separated Single Divorced Widowed Unemployed Loss of job in the current year Real household income % (real household income) GDP growth (3 year average) Inflation rate (3 year average) Unemployment rate (3 year average) * ** *** 85 Concern about foreigners 0.13 31. Control variable Concern about foreigners in Germany 1 Male German nationality Married Separated Single Divorced Loss of job in the current year Real household income (average) Total sample 24.71 1. age. while those moving in the opposite direction (from the highest to the lowest level of concern) Table 5 Percent distribution of selected variables across changes in self-declared concern about foreigners. Becchetti et al.01.63 20.0216*** 0.0043 −0.003 0. An example of this is the share of separated respondents who become more tolerant.83 57. for which we report the averages conditional to the level of concern.16 2999 23.

424 (Regr.0037404 (8.0616793 (1.0692768 (−2.0004813 (0.45) 0.15) 47. However. change in real household income.0624045 (1.0004708 (0.910 −55.108765 (−10. however. which divides actual income by the weighted sum of family members (the first adult is given a unit weight.58) 0. Interpretations and robustness checks The above-described econometric findings support the hypothesis of a significant association.0834658 (−32.53) 0.41219 (19. and the three macro variables used in the previous tables.062852 (−1. the GDP growth is extremely flat in the period considered.21807 (4.62875 (−18.98) −0. Age and loss of job are positively associated with an increase in the level of concern.46) −0.22733 (−13.418345 (19.1068075 (6.46) −0.0412602 (2.47) 0. while the coefficient of the GDP growth is no longer statistically significant. as said before. chasing power and therefore have a positive effect on worry about foreigners.726 Legend: the dependent variable is the self-declared level of concern about foreigners.87) −0.86692 (4.31) 80. loss of job. this variable takes only 13 different values in a sample containing 149. L3) and 80. for regressions in levels (Table 8a) and in first differences (Table 8b).424 2. 2003.19) 0.0199797 (0.41) 0. additional adult members weight 0. Becchetti and Santoro. given the structure of our data and the availability of only 13 different values for GDP.86 L.25) 0.07) 0. The results are substantially unchanged. Can we conclude that economic growth has positive moral consequences from this point of view? The answer seems to be affirmative when prosperity translates into significant changes in individual economic conditions (not only growth but also the distribution of “growth dividends” matters). while higher levels of unemployment increase the perception of competition in society.0357562 (2.0677047 (−2. 7 A final robustness check is performed by replacing our income measure with equivalised real household income using the OECD standard correction.1210891 (4.90) 149.76) −0.2728341 (16.20) 0.0379108 (1.5038958 (9.23) 0.46) −0. Moreover. between real household income and concern about foreigners.0032189 (−0. Table 7 presents the results of the first difference regressions.0467198 (3. 2007).6 A puzzling result relates to GDP growth.0831164 (−32.44) 0.83) −0. The results on inflation and unemployment rates are in line with those in Table 6.0971186 (4.2543266 (10. but cannot directly test whether this is determined by a direct causality link from changes in household income to changes in self-declared concern. They are omitted for reasons of space and are available upon request. net of the fixed effects.92872 (−13.71) −0. possibly solving the puzzle.5 and children weight 0.90) 0. Regressions were run by using random effects ordered probit with time trend.3).18) 80. .10) 0.0003522 (0. For this reason. which has a positive effect on the level of concern.78) −0.77) −0.0627287 (−17.0626314 (−17. The interpretation of this finding is that higher unemployment increases the fear of being fired and also entails costs for workers in terms of higher taxes or increased support to unemployed family members.0201817 (0.73) 35.52) L3 L4 0. nationality and age subgroups.1033214 (6. L4) observations. that.92) 149.424 1.64) 0. Table 8a and b report for these regressions only the magnitude and the t-statistics of the coefficient of the (change of) concern.451 (Regr. LR 2 −65.5063628 (14. documenting that all the coefficients are significant and negative.59) −54. the characteristics of our variables and the first difference estimates induce us to conclude that the direct causality is the most likely interpretation of our findings.4142591 (24.60) 0. While regressions D1 and D3 include the full sample.0625348 (−1. the value 3 being the maximum and 1 the minimum. The dependent variable is the change of declared level of concern while the independent variables are age.0342072 (1. While it is plausible to assume from 6 Several empirical papers document that it is not just the personal unemployment status but also the aggregate level of unemployment which negatively affects individual happiness (Di Tella and MacCulloch. Our findings are inevitably weaker when we look at the relationship between the dependent variable and the aggregate measure of GDP variation.46754 (4. / The Journal of Socio-Economics 39 (2010) 81–88 Table 6 Determinants of levels of self-declared concern about foreigners. Becchetti et al.49) 0.57) L2 0.13) 0.0079964 (−0.1075701 (−8.01) 0. D2 and D4 restrict the sample to native Germans.83) −0.0957589 (4.53) 0.1058542 (−7.16019 (4.0038015 (8.3864928 (15.42) −63.15) 0.08) −0.37229 (−19.77) 46.7 When performing our analysis a problem of reverse causality arose because concern about foreigners and growth influence each other.205 0.1207357 (4.75) −0. We identify a significant nexus between the two variables of interest.451 1. Consider.60) 0. separation status.85) −0.71) 0. we perform some robustness checks by running separate regressions by gender.035822 (2.61) 0.75) −0. 4. while a rise in real income has a significant and negative effect on it.62) 0.04) 0.69) 37.451 846 0.0079654 (−0. with and without macro variables.106838 (−11. L1 German nationality Age Male Education Married Separated Divorced Widowed Unemployed ln (real household income) GDP growth (3 year average) Inflation rate (3 year average) Unemployment rate (3 year average) cut1 cut2 Obs. and in the expected direction.

D1 Age Separated % (real household income) Loss of job in the current year GDP growth (3 year) Inflation rate (3 year) Unemployment rate (3 year) cut1 cut2 cut3 cut4 Obs.110712 (−8.36) −0.0673059 (−5.0867719 (−7.88) 0.06) −0.16) 0.96) −0.52) 2. Finally. Becchetti et al. The advantage of the panel VAR model is that it jointly tests for the existence of the two possible causality directions between the selected variables (Holtz-Eakin et al. The problem with the panel VAR model is that we are forced to assume that the discrete dichotomous structure of self-declared tolerance may be approximated by a continuous variable.0380809 (1. the economy is.077682 (−6.02) 3.07) −0.87) −0.0005871 (3. it is more difficult to imagine that short-term increases in self-declared concern about foreigners among the interviewees can generate immediate negative changes in their respective household earning capacities.7549865 (−78.52) −0.0609623 (−6. Frey and Stutzer (2006) have done something similar on the 0–10 scale self-satisfaction variable.0004486 (2.0263016 (1.44) 104. Regressions were run by using random effects ordered probit.1222583 (13.007969 (−165.73) 0.28) −0. self-declared tolerance (real household income) is regressed on its past values and on past values of real household income (self-declared tolerance).26) 0.000496 (2.01 D4 0.0424949 (−3.2603877 (−10.60) −0.25) −0.94) −0.1336803 (−9.27) Yes an aggregate point of view that less concern creates an environment more favourable to economic prosperity.13) −0.28) −0.11) 0.37) −0.81) 104.8 5.033971 (1. A Granger causality test confirms the negative and significant effect from real household income to self-declared tolerance.0505615 (−4.0526402 (−4.749 94.51) No −0.070311 (−156.91) −0.350964 (32.1004478 (−8. However.58) −0.80) −0.8886012 (91.37) −0. Table 8 Robustness checks on the relationship between real household income and selfdeclared concern sensitivity analysis.14) 2.69) 2.67) −0..0375394 (−1.7980824 (−76.17) −0.063497 (160.065591 (−4. .1220635 (−7.684308 (32.8059779 (7.682 61.L.102644 (−6. For this reason.19) 0.682 371. (a) Concern about foreigners in Germany Coefficient of the log of real household income Male Female German Not German Age ≤ 43 Age > 43 Macro variables −0. at least from the algebraic point of view (see footnotes 3 and 4 for qualifications and distinctions).39) −0. LR 2 −2. in the first (second) equation.078249 (174.45) 0. The reference specifications for (a) are regression L1 (without macro variables) and L3 (with macro variables) in Table 6 and those for (b) are regressions D1 (without macro variables) and D3 (with macro variables) in Table 7.48) −0. / The Journal of Socio-Economics 39 (2010) 81–88 Table 7 Determinants of the changes in the level of self-declared concern about foreigners.10) 0.5032755 (4. we believe that this assumption is stronger in our case (even though not necessarily implausible) and therefore prefer to omit the results of the estimates (available upon request) from the paper.0805345 (−3. low growth and high unemployment and inflation rates (which create the conditions for economic stagnation) may contribute to reinforcing the belief that (b) Concern about foreigners in Germany Coefficient of the one year log difference in real household income Male Female German Not German Age ≤ 43 Age > 43 Macro variables −0.8754212 (1. 1988).40) 0. It is difficult to imagine that a reduction in worry about foreigners (or omitted variables related to it) may be the cause of the improved performance of the above-mentioned macroeconomic indicators.0539165 (−3.57) −0.53) −0.40) −0.55) 0.33) −0.59) −0.27) −0.39) −0. reverse causality must definitely be excluded when we compare changes in aggregate economic indicators and changes in respondents’ self-declared concern about foreigners.53) 119. finding that the results of OLS and orderer probit models are not very different.26) −0.88) 0.37) Yes Legend: The tables report coefficients and t-statistics of the level of concern (a) and change of level of concern (b) from regressions run by gender.92) D2 0.0324494 (−1.0716945 (−3.749 396.98) 3.0640617 (−7.1143805 (−8. nationality and age subsamples. 8 As a final robustness check on the causality nexus between the two variables we estimate a two-equation panel VAR model where.32 −2.0880567 (−9.1036904 (−7.155982 (21.1628867 (16.64) −0.1258096 (−9.24) −0.0002665 (1.0303214 (1.4706481 (−4.7545282 (−7.7413222 (−1. a zero (or a negative) sum game. The results on inflation and unemployment go in the right direction in first difference estimates.45) 0.485061 (21.0423656 (−1.1158054 (−8.91) 2. since our variable is on a 1–3 scale.0770799 (−9.34) 0.68) −0. Conclusions A large part of public opinion tends to believe that economic activity is a zero sum game in which the gain of a given group of individuals is necessarily offset by the loss of another group.77) No −0.088207 (−6.00) −0.97 87 Legend: the dependent variable is the one-year change in self-declared level of concern about foreigners.0370762 (−1.0859836 (−7.1519849 (7.0315256 (−1.1 0.1322912 (5.34) 119.95) D3 0. In periods of stagnation in which real GDP growth is non-positive.0984528 (−7. by definition.8711034 (83.

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