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New Research Says Unemployment Matters Twice as Much as Inflation to Voters

Originally Published19 February 2001

Jobs, not a low rate of inflation, should be the primary concern of a government. That is the finding from new research done at The University of Warwick that studied more than a quarter of a million people.

The research conducted by Professor Andrew Oswald of the Department of Economics of the University of Warwick, and colleagues Rafael Di Tella of Harvard University and Robert MacCulloch of the London School of Economics, overturns conventional wisdom.

The standard view has always been that unemployment and inflation are equally costly. That is simply wrong, according to the economists. The authors' work is to be published in the March issue of the American Economic Review, the most famous economics journal in the world.

'Students might as well rip up their textbooks' said Professor Oswald. 'First, our team has worked out a new way to assess the damage caused by inflation and unemployment. Second, we show that jobs are nearly twice as important as low inflation', he said.

The research spells the end for a favourite idea of journalists and politicians -- the 'misery index'. This has traditionally been calculated by adding together the inflation rate and the unemployment rate, to give a measure of how well a country is doing. Professor Oswald's group proves that the true index should instead put double the weight on unemployment.

The research team studied the psychological wellbeing levels of more than 250,000 randomly chosen people. Data came from all over Europe and covered the 1970s to the 1990s. The economists found that people's reported levels of happiness were much more affected by movements in a country's unemployment rate than its inflation rate. They worked out the weight that European citizens put on having low unemployment versus low inflation.

Professor Di Tella from Harvard, said 'This new style of work will change economics.'

The authors' paper Preferences over Inflation and Unemployment: Evidence from Surveys of Happiness is available at

For further information please contact:

Professor Andrew Oswald, Professor of Economics
University of Warwick Tel: 024 76 523510 (Office),
01367 860005 (Home)
email (office) (home)


Further information about the above press release and all other media services at the University of Warwick can be obtained from:

Peter Dunn, Press Officer
Public Affairs Office
Senate House
University of Warwick
Coventry, CV4 7AL
West Midlands
Tel: 024 76 523708