IDEAS home Printed from https://ideas.repec.org/a/oup/wbecrv/v30y2016i1p55-77..html
   My bibliography  Save this article

Economic Shocks and Subjective Well-Being: Evidence from a Quasi-Experiment

Author

Listed:
  • Jacob Gerner Hariri
  • Christian Bjørnskov
  • Mogens K. Justesen

Abstract

This article examines how economic shocks affect individual well-being in developing countries. Using the case of a sudden and unanticipated currency devaluation in Botswana as a quasi-experiment, we examine how this monetary shock affects individuals' evaluations of well-being. We do so by using microlevel survey data, which—incidentally—were collected in the days surrounding the devaluation. The chance occurrence of the devaluation during the time of the survey enables us to use pretreatment respondents, surveyed before the devaluation, as approximate counterfactuals for post-treatment respondents, surveyed after the devaluation. Our estimates show that the devaluation had a large and significantly negative effect on individuals' evaluations of subjective well-being. These results suggest that macroeconomic shocks, such as unanticipated currency devaluations, may have significant short-term costs in the form of reductions in people's sense of well-being.

Suggested Citation

  • Jacob Gerner Hariri & Christian Bjørnskov & Mogens K. Justesen, 2016. "Economic Shocks and Subjective Well-Being: Evidence from a Quasi-Experiment," The World Bank Economic Review, World Bank, vol. 30(1), pages 55-77.
    • Handle: RePEc:oup:wbecrv:v:30:y:2016:i:1:p:55-77.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/wber/lhv004
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Bjørnskov, Christian & Dreher, Axel & Fischer, Justina A.V., 2010. "Formal institutions and subjective well-being: Revisiting the cross-country evidence," European Journal of Political Economy, Elsevier, vol. 26(4), pages 419-430, December.
    2. Robert J. MacCulloch & Rafael Di Tella & Andrew J. Oswald, 2001. "Preferences over Inflation and Unemployment: Evidence from Surveys of Happiness," American Economic Review, American Economic Association, vol. 91(1), pages 335-341, March.
    3. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
    4. Betsey Stevenson & Justin Wolfers, 2008. "Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(1 (Spring), pages 1-102.
    5. Christian Bjørnskov, 2014. "Do Economic Reforms Alleviate Subjective Well-Being Losses of Economic Crises?," Journal of Happiness Studies, Springer, vol. 15(1), pages 163-182, February.
    6. Besley, Timothy & Case, Anne, 2000. "Unnatural Experiments? Estimating the Incidence of Endogenous Policies," Economic Journal, Royal Economic Society, vol. 110(467), pages 672-694, November.
    7. John Helliwell & Shun Wang, 2014. "Weekends and Subjective Well-Being," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 116(2), pages 389-407, April.
    8. Mounir Karadja & Johanna Mollerstrom & David Seim, 2017. "Richer (and Holier) Than Thou? The Effect of Relative Income Improvements on Demand for Redistribution," The Review of Economics and Statistics, MIT Press, vol. 99(2), pages 201-212, May.
    9. Angus Deaton, 2012. "The financial crisis and the well-being of Americans," Oxford Economic Papers, Oxford University Press, vol. 64(1), pages 1-26, January.
    10. Alberto Montagnoli & Mirko Moro, 2014. "Everybody Hurts: Banking Crises and Individual Wellbeing," Working Papers 2014010, The University of Sheffield, Department of Economics.
    11. Dolan, Paul & Peasgood, Tessa & White, Mathew, 2008. "Do we really know what makes us happy A review of the economic literature on the factors associated with subjective well-being," Journal of Economic Psychology, Elsevier, vol. 29(1), pages 94-122, February.
    12. Asadullah, Mohammad Niaz & Chaudhury, Nazmul, 2012. "Subjective well-being and relative poverty in rural Bangladesh," Journal of Economic Psychology, Elsevier, vol. 33(5), pages 940-950.
    13. Alberto Abadie & David Drukker & Jane Leber Herr & Guido W. Imbens, 2004. "Implementing matching estimators for average treatment effects in Stata," Stata Journal, StataCorp LP, vol. 4(3), pages 290-311, September.
    14. Robinson, Gregory & McNulty, John E. & Krasno, Jonathan S., 2009. "Observing the Counterfactual? The Search for Political Experiments in Nature," Political Analysis, Cambridge University Press, vol. 17(4), pages 341-357.
    15. Bruno S. Frey, 2008. "Happiness: A Revolution in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262062771, December.
    16. Easterlin, Richard A., 1995. "Will raising the incomes of all increase the happiness of all?," Journal of Economic Behavior & Organization, Elsevier, vol. 27(1), pages 35-47, June.
    17. Paul Frijters & John P. Haisken-DeNew & Michael A. Shields, 2004. "Money Does Matter! Evidence from Increasing Real Income and Life Satisfaction in East Germany Following Reunification," American Economic Review, American Economic Association, vol. 94(3), pages 730-740, June.
    18. Justesen, Mogens K., 2012. "Democracy, dictatorship, and disease: Political regimes and HIV/AIDS," European Journal of Political Economy, Elsevier, vol. 28(3), pages 373-389.
    19. Meyer, Bruce D, 1995. "Natural and Quasi-experiments in Economics," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(2), pages 151-161, April.
    20. Ho, Daniel E. & Imai, Kosuke & King, Gary & Stuart, Elizabeth A., 2007. "Matching as Nonparametric Preprocessing for Reducing Model Dependence in Parametric Causal Inference," Political Analysis, Cambridge University Press, vol. 15(3), pages 199-236, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:hal:spmain:info:hdl:2441/7fst0pcf5j8cr99e1nuobt97rn is not listed on IDEAS
    2. Sibylle Puntscher & Janette Walde & Gottfried Tappeiner, 2016. "Do methodical traps lead to wrong development strategies for welfare? A multilevel approach considering heterogeneity across industrialized and developing countries," Working Papers 2016-01, Faculty of Economics and Statistics, Universität Innsbruck.
    3. Powell-Jackson, Timothy & Pereira, Shreya K. & Dutt, Varun & Tougher, Sarah & Haldar, Kaveri & Kumar, Paresh, 2016. "Cash transfers, maternal depression and emotional well-being: Quasi-experimental evidence from India’s Janani Suraksha Yojana programme," Social Science & Medicine, Elsevier, vol. 162(C), pages 210-218.
    4. Sergei Guriev & Ekaterina Zhuravskaya, 2009. "(Un)happiness in Transition," Journal of Economic Perspectives, American Economic Association, vol. 23(2), pages 143-168, Spring.
    5. De, Prabal K. & Thamarapani, Dhanushka, 2022. "Impacts of negative shocks on wellbeing and aspirations – Evidence from an earthquake," World Development, Elsevier, vol. 154(C).
    6. Emilio Colombo & Valentina Rotondi & Luca Stanca, 2018. "Macroeconomic conditions and well-being: do social interactions matter?," Applied Economics, Taylor & Francis Journals, vol. 50(28), pages 3029-3038, June.
    7. Efstratia Arampatzi & Martijn Burger & Spyridon Stavropoulos & Louis Tay, 2020. "The Role of Positive Expectations for Resilience to Adverse Events: Subjective Well-Being Before, During and After the Greek Bailout Referendum," Journal of Happiness Studies, Springer, vol. 21(3), pages 965-995, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gregor Gonza & Anže Burger, 2017. "Subjective Well-Being During the 2008 Economic Crisis: Identification of Mediating and Moderating Factors," Journal of Happiness Studies, Springer, vol. 18(6), pages 1763-1797, December.
    2. Antje Mertens & Miriam Beblo, 2016. "Self-Reported Satisfaction and the Economic Crisis of 2007–2010: Or How People in the UK and Germany Perceive a Severe Cyclical Downturn," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 125(2), pages 537-565, January.
    3. Jan-Emmanuel De Neve & George Ward & Femke De Keulenaer & Bert Van Landeghem & Georgios Kavetsos & Michael I. Norton, 2018. "The Asymmetric Experience of Positive and Negative Economic Growth: Global Evidence Using Subjective Well-Being Data," The Review of Economics and Statistics, MIT Press, vol. 100(2), pages 362-375, May.
    4. Badunenko, Oleg & Cordero, Jose M. & Kumbhakar, Subal C., 2021. "Are you slacking? Where do you and your country stand in the happiness pursuit?," MPRA Paper 108316, University Library of Munich, Germany.
    5. Bjørnskov, Christian & Dreher, Axel & Fischer, Justina A.V., 2010. "Formal institutions and subjective well-being: Revisiting the cross-country evidence," European Journal of Political Economy, Elsevier, vol. 26(4), pages 419-430, December.
    6. Gehring, Kai, 2013. "Who Benefits from Economic Freedom? Unraveling the Effect of Economic Freedom on Subjective Well-Being," World Development, Elsevier, vol. 50(C), pages 74-90.
    7. Cordero, José Manuel & Salinas-Jiménez, Javier & Salinas-Jiménez, M Mar, 2017. "Exploring factors affecting the level of happiness across countries: A conditional robust nonparametric frontier analysis," European Journal of Operational Research, Elsevier, vol. 256(2), pages 663-672.
    8. Sarah Flèche, 2015. "Distaste for Centralization: Evidence from a Quasi-Natural Experiment in Switzerland," CEP Discussion Papers dp1383, Centre for Economic Performance, LSE.
    9. Roberta Distante, 2013. "Subjective Well-Being, Income and Relative Concerns in the UK," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 113(1), pages 81-105, August.
    10. Byela Tibesigwa & Martine Visser & Brennan Hodkinson, 2016. "Effects of Objective and Subjective Income Comparisons on Subjective Wellbeing," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 128(1), pages 361-389, August.
    11. Leonardo Becchetti & Alessandra Pelloni, 2013. "What are we learning from the life satisfaction literature?," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 60(2), pages 113-155, June.
    12. Czapinski, Janusz, 2013. "The economics of happiness and psychology of wealth," MPRA Paper 52897, University Library of Munich, Germany.
    13. Leonardo Becchetti & Elena Giachin Ricca & Alessandra Pelloni, 2009. "The 60s Turnaround as a Test on the Causal Relationship between Sociability and Happiness," SOEPpapers on Multidisciplinary Panel Data Research 209, DIW Berlin, The German Socio-Economic Panel (SOEP).
    14. Tonzer, Lena, 2017. "Uncertainty, financial crises, and subjective well-being," IWH Discussion Papers 2/2017, Halle Institute for Economic Research (IWH).
    15. Cordero, Jose M. & Salinas-Jiménez, Javier & Salinas-Jiménez, Mª Mar, 2014. "Assessing the level of happiness across countries: A robust frontier approach," MPRA Paper 57784, University Library of Munich, Germany.
    16. Alpaslan Akay & Olivier Bargain & Klaus F. Zimmermann, 2017. "Home Sweet Home?: Macroeconomic Conditions in Home Countries and the Well-Being of Migrants," Journal of Human Resources, University of Wisconsin Press, vol. 52(2), pages 351-373.
    17. Hajdu, Tamás & Hajdu, Gábor, 2011. "A hasznosság és a relatív jövedelem kapcsolatának vizsgálata magyar adatok segítségével [Examining the relation of utility and relative income using Hungarian data]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(1), pages 56-73.
    18. Arik Levinson, 2013. "Happiness as a Public Policy Tool," Working Papers gueconwpa~13-13-04, Georgetown University, Department of Economics.
    19. Luca Stanca, 2010. "The Geography of Economics and Happiness: Spatial Patterns in the Effects of Economic Conditions on Well-Being," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 99(1), pages 115-133, October.
    20. Hania Wu & Tony Tam, 2015. "Economic Development and Socioeconomic Inequality of Well-Being: A Cross-Sectional Time-Series Analysis of Urban China, 2003–2011," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 124(2), pages 401-425, November.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:wbecrv:v:30:y:2016:i:1:p:55-77.. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://edirc.repec.org/data/wrldbus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.