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Poverty and Well-Being: Panel Evidence from Germany

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  • Andrew E. Clark

    (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris - Institut national de la recherche agronomique (INRA))

  • Conchita D'Ambrosio

    ()
    (Universita' di Milano-Bicocca - Universita' di Milano-Bicocca, DIW - Deutsches Institut für Wirtschaftsforschung - German Institute for Economic Research, Econpubblica - Università commerciale Luigi Bocconi)

  • Simone Ghislandi

    (Econpubblica - Università commerciale Luigi Bocconi, Università commerciale Luigi Bocconi - Università commerciale Luigi Bocconi)

Abstract

We consider the link between poverty and subjective well-being, and focus in particular on the role of time. We use panel data on 42,500 individuals living in Germany from 1992 to 2010 to uncover four empirical relationships. First, life satisfaction falls with both the incidence and intensity of contemporaneous poverty. There is no evidence of adaptation within a poverty spell: poverty starts bad and stays bad in terms of subjective well-being. Third, poverty scars: those who have been poor in the past report lower life satisfaction today, even when out of poverty. Last, the order of poverty spells matters: for a given number of poverty spells, satisfaction is lower when the spells are concatenated: poverty persistence reduces well-being. These effects differ by population subgroups.

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Bibliographic Info

Paper provided by HAL in its series PSE Working Papers with number hal-00814659.

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Date of creation: Apr 2013
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Handle: RePEc:hal:psewpa:hal-00814659

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Keywords: Income ; Poverty ; Subjective well-being ; SOEP;

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References

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  1. Raquel Fernández & Alessandra Fogli & Claudia Olivetti, 2004. "Mothers and Sons: Preference Formation and Female Labor Force Dynamics," The Quarterly Journal of Economics, MIT Press, vol. 119(4), pages 1249-1299, November.
  2. David Clark, 2009. "Adaptation, Poverty and Well-Being: Some Issues and Observations with Special Reference to the Capability Approach and Development Studies," Journal of Human Development and Capabilities, Taylor & Francis Journals, vol. 10(1), pages 21-42.
  3. Rafael Di Tella & John Haisken-De New & Robert MacCulloch, 2007. "Happiness Adaptation to Income and to Status in an Individual Panel," NBER Working Papers 13159, National Bureau of Economic Research, Inc.
  4. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2008. "Relative Income, Happiness, and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," Journal of Economic Literature, American Economic Association, vol. 46(1), pages 95-144, March.
  5. Richard Layard & Andrew Clark & Nattavudh Powdthavee & Francesca Cornaglia, 2013. "What predicts a successful life? A life-course model of well-being," Sciences Po publications 2013-16, Sciences Po.
  6. Andreas Knabe & Steffen Rätzel, 2008. "Scarring or Scaring? The Psychological Impact of Past Unemployment and Future Unemployment Risk," FEMM Working Papers 08013, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
  7. Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
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  9. Markku Kaustia & Samuli Knüpfer, 2008. "Do Investors Overweight Personal Experience? Evidence from IPO Subscriptions," Journal of Finance, American Finance Association, vol. 63(6), pages 2679-2702, December.
  10. Oswald, Andrew J. & Powdthavee, Nattavudh, 2006. "Does Happiness Adapt? A Longitudinal Study of Disability with Implications for Economists and Judges," IZA Discussion Papers 2208, Institute for the Study of Labor (IZA).
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  12. Ulrike Malmendier & Stefan Nagel, 2009. "Depression Babies: Do Macroeconomic Experiences Affect Risk-Taking?," NBER Working Papers 14813, National Bureau of Economic Research, Inc.
  13. 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.
  14. Ruhm, Christopher J, 1991. "Are Workers Permanently Scarred by Job Displacements?," American Economic Review, American Economic Association, vol. 81(1), pages 319-24, March.
  15. Blanchflower, David G. & Oswald, Andrew J., 2004. "Well-being over time in Britain and the USA," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1359-1386, July.
  16. Tania Burchardt, 2005. "Are One Man’s Rags Another Man’s Riches? Identifying Adaptive Expectations using Panel Data," Social Indicators Research, Springer, vol. 74(1), pages 57-102, October.
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Cited by:
  1. Piper, Alan T., 2013. "Europe’s capital cities and the happiness penalty: an investigation using the European Social Survey," MPRA Paper 47793, University Library of Munich, Germany.
  2. Piper, Alan T., 2013. "Happiness, Dynamics and Adaptation," MPRA Paper 52342, University Library of Munich, Germany.

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