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Perception and retrospection: the dynamic consistency of responses to survey questions on wellbeing

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  • Stephen Pudney

    ()
    (Institute for Fiscal Studies and Institute for Social and Economic Research)

Abstract

Implementation of broad approaches to welfare analysis usually entails the use of 'subjective' welfare indicators. We analyse BHPS data on financial wellbeing to determine whether reported current and retrospective perceptions are consistent with each other and with the existence of a common underlying wellbeing concept. We allow for adjustment of perceptions in a vector ARMA model for panel data, with dependent variables observed ordinally and find that current perceptions exhibit slow adjustment to changing circumstances and retrospective assessments of past wellbeing are heavily contaminated by current circumstances, causing significant bias in measures of the level and change in welfare.

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File URL: http://cemmap.ifs.org.uk/wps/cwp1210.pdf
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Bibliographic Info

Paper provided by Centre for Microdata Methods and Practice, Institute for Fiscal Studies in its series CeMMAP working papers with number CWP12/10.

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Date of creation: Jun 2010
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Handle: RePEc:ifs:cemmap:12/10

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  1. Vassilis A. Hajivassiliou & Paul A. Ruud, 1993. "Classical Estimation Methods for LDV Models Using Simulation," Cowles Foundation Discussion Papers 1051, Cowles Foundation for Research in Economics, Yale University.
  2. John Muellbauer & Anthony Murphy, 2008. "Housing markets and the economy: the assessment," Oxford Review of Economic Policy, Oxford University Press, vol. 24(1), pages 1-33, spring.
  3. Bruce D. Meyer & James X. Sullivan, 2003. "Measuring the Well-Being of the Poor Using Income and Consumption," NBER Working Papers 9760, National Bureau of Economic Research, Inc.
  4. repec:ese:iserwp:2006-27 is not listed on IDEAS
  5. Ada Ferrer-i-Carbonell & Paul Frijters, 2004. "How Important is Methodology for the estimates of the determinants of Happiness?," Economic Journal, Royal Economic Society, vol. 114(497), pages 641-659, 07.
  6. Paul Anand & Graham Hunter & Ian Carter & Keith Dowding & Francesco Guala & Martin Van Hees, 2009. "The Development of Capability Indicators," Journal of Human Development and Capabilities, Taylor & Francis Journals, vol. 10(1), pages 125-152.
  7. Jeff Dominitz & Charles F. Manski, 1994. "Using Expectations Data to Study Subjective Income Expectations," Econometrics 9411003, EconWPA.
  8. Goffe, William L. & Ferrier, Gary D. & Rogers, John, 1994. "Global optimization of statistical functions with simulated annealing," Journal of Econometrics, Elsevier, vol. 60(1-2), pages 65-99.
  9. Loewenstein, George & Ubel, Peter A., 2008. "Hedonic adaptation and the role of decision and experience utility in public policy," Journal of Public Economics, Elsevier, vol. 92(8-9), pages 1795-1810, August.
  10. Gabriella Conti & Stephen Pudney, 2011. "Survey Design and the Analysis of Satisfaction," The Review of Economics and Statistics, MIT Press, vol. 93(3), pages 1087-1093, August.
  11. repec:ese:iserwp:2006-35 is not listed on IDEAS
  12. Ravallion, Martin & Lokshin, Michael, 2000. "Identifying welfare effects from subjective questions," Policy Research Working Paper Series 2301, The World Bank.
  13. Henley, Andrew, 1998. "Changes in the Distribution of Housing Wealth in Great Britain, 1985-91," Economica, London School of Economics and Political Science, vol. 65(259), pages 363-80, August.
  14. Stephen Pudney, 2008. "The dynamics of perception: modelling subjective wellbeing in a short panel," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 171(1), pages 21-40.
  15. repec:ese:iserwp:2007-15 is not listed on IDEAS
  16. Erik Schokkaert, 2007. "Capabilities and Satisfaction with Life," Journal of Human Development and Capabilities, Taylor & Francis Journals, vol. 8(3), pages 415-430.
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Cited by:
  1. repec:ese:iserwp:2012-10 is not listed on IDEAS
  2. Martin Binder & Alex Coad, 2012. ""I'm afraid I have bad news for you…" Estimating the impact of different health impairments on subjective well-being," SPRU Working Paper Series 200, SPRU - Science and Technology Policy Research, University of Sussex.
  3. Christopher R. Bollinger & Cheti Nicoletti & Stephen Pudney, 2012. "Two can live as cheaply as one... But three's a crowd," Discussion Papers 12/23, Department of Economics, University of York.
  4. Adrian Chadi, 2014. "Dissatisfied with Life or with Being Interviewed? Happiness and Motivation to Participate in a Survey," IAAEU Discussion Papers 201403, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
  5. repec:ese:iserwp:2013-30 is not listed on IDEAS

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