April 2013

IZA DP No. 7365: The Marginal Income Effect of Education on Happiness: Estimating the Direct and Indirect Effects of Compulsory Schooling on Well-Being in Australia

Substantially revised version published as: 'What’s the good of education on our overall quality of life? A simultaneous equation model of education and life satisfaction for Australia', Journal of Behavioral and Experimental Economics, 2015, 54(1), 10-21. doi:10.1016/j.socec.2014.11.002

Many economists and educators favour public support for education on the premise that education improves the overall well-being of citizens. However, little is known about the causal pathways through which education shapes people's subjective well-being (SWB). This paper explores the direct and indirect well-being effects of extra schooling induced through compulsory schooling laws in Australia. We find the net effect of schooling on later SWB to be positive, though this effect is larger and statistically more robust for men than for women. We then show that the compulsory schooling effect on male's SWB is indirect and is mediated through income.