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Multidimensionality of Longitudinal Data: Unlocking the Age-Happiness Puzzle

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  • Ning Li

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    (Melbourne Institute of Applied Economic and Social Research)

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    Abstract

    In social and economic analysis of longitudinal data, the socio-economic variables that are statistically significant in pooled data regressions sometimes become insignificant after individual fixed effects are controlled for. This phenomenon has been observed in the analysis of the relationship between age and happiness. The discrepancy in results between regressions with and without controlling for individual fixed effects is sometimes known as a mystery in the research of age and happiness. This paper points out that cross-sectional information and longitudinal information reflect distinct aspects of the phenomenon under study. In age-happiness studies, cross-sectional information describes whether, in a particular year, people of a certain age are happier than people of other ages. Longitudinal information describes whether people become happier or less happy over the life cycle. The former compares happiness between different people, and the later compares happiness within the same person. Average happiness is U-shaped in age among different cohorts, and simultaneously decreases with age in the life cycle within individuals. Using data on happiness from the Household, Income and Labour Dynamics in Australia (HILDA) Survey, this paper explains what “individual fixed effects are controlled for” means in the context of FE regression, gives insight into the age-happiness puzzle and raises awareness of the multidimensionality of longitudinal data.

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    Bibliographic Info

    Paper provided by Melbourne Institute of Applied Economic and Social Research, The University of Melbourne in its series Melbourne Institute Working Paper Series with number wp2014n04.

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    Length: 36pp
    Date of creation: Mar 2014
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    Handle: RePEc:iae:iaewps:wp2014n04

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    Postal: Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Victoria 3010 Australia
    Phone: +61 3 8344 2100
    Fax: +61 3 8344 2111
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    Web page: http://www.melbourneinstitute.com/
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    Keywords: Life satisfaction; cohort; ageing; OLS; individual fixed effects; between-person variation; within-person variation; HILDA;

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    1. Blanchflower, David G. & Oswald, Andrew J., 2008. "Is well-being U-shaped over the life cycle?," Social Science & Medicine, Elsevier, Elsevier, vol. 66(8), pages 1733-1749, April.
    2. Heather Lacey & Todd Kierstead & Diana Morey, 2012. "De-Biasing the Age-Happiness Bias: Memory Search and Cultural Expectations in Happiness Judgments Across the Lifespan," Journal of Happiness Studies, Springer, Springer, vol. 13(4), pages 647-658, August.
    3. de Ree, Joppe & Alessie, Rob, 2011. "Life satisfaction and age: Dealing with underidentification in age-period-cohort models," Social Science & Medicine, Elsevier, Elsevier, vol. 73(1), pages 177-182, July.
    4. Cheng, Terence C & Powdthavee, Nattavudh & Oswald, Andrew J, 2014. "Longitudinal Evidence for a Midlife Nadir in Human Wellbeing: Results from Four Data Sets," The Warwick Economics Research Paper Series (TWERPS) 1037, University of Warwick, Department of Economics.
    5. Paul Frijters & Tony Beatton, 2008. "The mystery of the U-shaped relationship between happiness and age," NCER Working Paper Series, National Centre for Econometric Research 26, National Centre for Econometric Research.
    6. Wencke Gwozdz & Alfonso Sousa-Poza, 2010. "Ageing, Health and Life Satisfaction of the Oldest Old: An Analysis for Germany," Social Indicators Research, Springer, Springer, vol. 97(3), pages 397-417, July.
    7. Bert G.M. Van Landeghem, 2008. "Human Well-Being over the Life Cycle: Longitudinal Evidence from a 20-Year Panel," LICOS Discussion Papers, LICOS - Centre for Institutions and Economic Performance, KU Leuven 21308, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    8. Chaonan Chen, 2001. "Aging and Life Satisfaction," Social Indicators Research, Springer, Springer, vol. 54(1), pages 57-79, April.
    9. Fischer, Justina AV, 2009. "Happiness and age cycles – return to start…," MPRA Paper 15249, University Library of Munich, Germany.
    10. Kassenboehmer, Sonja C. & Haisken-DeNew, John P., 2012. "Heresy or enlightenment? The well-being age U-shape effect is flat," Economics Letters, Elsevier, Elsevier, vol. 117(1), pages 235-238.
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