How well do individuals predict their future life satisfaction? Evidence from panel data following a nationwide exogenous shock
AbstractUsing German panel data, we investigate how well individuals predict their own future life satisfaction. The context is the decade following the 1990 reunification of Germany, which provided a large shock to the future prospects of the inhabitants of the former East Germany. We find that the majority of East Germans significantly overestimated the satisfaction gains from reunification in the years immediately after transition, but by 1994 had converged on correct aggregate expectations. Some evidence of micro-heterogeneity in the prediction errors is found by age and education. For West Germans, we find some initial over-optimism, although less than for East Germans.
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Bibliographic InfoArticle provided by Canadian Economics Association in its journal Canadian Journal of Economics.
Volume (Year): 42 (2009)
Issue (Month): 4 (November)
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- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
- Z1 - Other Special Topics - - Cultural Economics
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- Michael Kind & John P. Haisken-DeNew, 2012.
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