Multidimensionality of Longitudinal Data: Unlocking the Age-Happiness Puzzle
AbstractIn 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 InfoPaper 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.
Date of creation: Mar 2014
Date of revision:
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Life satisfaction; cohort; ageing; OLS; individual fixed effects; between-person variation; within-person variation; HILDA;
Find related papers by JEL classification:
- I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
- C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
- C80 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - General
This paper has been announced in the following NEP Reports:
- NEP-AGE-2014-04-11 (Economics of Ageing)
- NEP-ALL-2014-04-11 (All new papers)
- NEP-GER-2014-04-11 (German Papers)
- NEP-HAP-2014-04-11 (Economics of Happiness)
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