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Does Happiness Adapt? A Longitudinal Study of Disability with Implications for Economists and Judges

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Author Info
Andrew J. Oswald () (University of Warwick and IZA Bonn)
Nattavudh Powdthavee () (University of London)

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Abstract

Economics ignores the possibility of hedonic adaptation (the idea that people bounce back from utility shocks). This paper argues that economists are wrong to do so. It provides longitudinal evidence that individuals who become disabled go on to exhibit recovery in mental wellbeing. Adaptation to severe disability, however, is shown to be incomplete. The paper suggests ways to calculate the level of compensatory damages for the pain and suffering from disablement. Courts all over the world currently use ad hoc methods.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2208.

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Length: 40 pages
Date of creation: Jul 2006
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Handle: RePEc:iza:izadps:dp2208

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Related research
Keywords: disability; adaptation; happiness; legal compensation; wellbeing; GHQ scores;

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Find related papers by JEL classification:
D1 - Microeconomics - - Household Behavior
I3 - Health, Education, and Welfare - - Welfare and Poverty
I31 - Health, Education, and Welfare - - Welfare and Poverty - - - General Welfare
K0 - Law and Economics - - General

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Other versions:
  2. Christopher D. Carroll & Jody Overland & David N. Weil, 2000. "Saving and Growth with Habit Formation," American Economic Review, American Economic Association, vol. 90(3), pages 341-355, June. [Downloadable!] (restricted)
    Other versions:
  3. 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. [Downloadable!] (restricted)
    Other versions:
  4. Clark, Andrew E., 1999. "Are wages habit-forming? evidence from micro data," Journal of Economic Behavior & Organization, Elsevier, vol. 39(2), pages 179-200, June. [Downloadable!] (restricted)
  5. Jonathan Gardner & Andrew J. Oswald, 2006. "Do divorcing couples become happier by breaking up?," Journal Of The Royal Statistical Society Series A, Royal Statistical Society, vol. 169(2), pages 319-336. [Downloadable!] (restricted)
    Other versions:
  6. Bruno S. Frey & Alois Stutzer, 2002. "What Can Economists Learn from Happiness Research?," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 402-435, June.
    Other versions:
  7. Andrew Clark & Ed Diener & Yannis Georgellis & Richard E. Lucas, 2003. "Lags and Leads in Life Satisfaction: A Test of the Baseline Hypothesis," DELTA Working Papers 2003-14, DELTA (Ecole normale supérieure). [Downloadable!]
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  8. Easterlin, Richard A, 2001. "Income and Happiness: Towards an Unified Theory," Economic Journal, Royal Economic Society, vol. 111(473), pages 465-84, July. [Downloadable!] (restricted)
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  14. Stutzer, Alois, 2004. "The role of income aspirations in individual happiness," Journal of Economic Behavior & Organization, Elsevier, vol. 54(1), pages 89-109, May. [Downloadable!] (restricted)
    Other versions:
  15. Easterlin, Richard A., 2005. "A puzzle for adaptive theory," Journal of Economic Behavior & Organization, Elsevier, vol. 56(4), pages 513-521, April. [Downloadable!] (restricted)
  16. Rafael Di Tella & Robert J. MacCulloch & Andrew J. Oswald, 2003. "The Macroeconomics of Happiness," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 809-827, 09. [Downloadable!] (restricted)
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  17. Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, vol. 104(424), pages 648-59, May. [Downloadable!] (restricted)
  18. Erzo F. P. Luttmer, 2005. "Neighbors as Negatives: Relative Earnings and Well-Being," The Quarterly Journal of Economics, MIT Press, vol. 120(3), pages 963-1002, August.
    Other versions:
  19. Carroll, Christopher D. & Weil, David N., 1994. "Saving and growth: a reinterpretation," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 40(1), pages 133-192, June. [Downloadable!] (restricted)
    Other versions:
  20. Andrew J. Oswald, 2005. "On the Common Claim that Happiness Equations Demonstrate Diminishing Marginal Utility of Income," IZA Discussion Papers 1781, Institute for the Study of Labor (IZA). [Downloadable!]
  21. Richard Layard, 2006. "Happiness and Public Policy: a Challenge to the Profession," Economic Journal, Royal Economic Society, vol. 116(510), pages C24-C33, 03. [Downloadable!] (restricted)
  22. Richard E. Lucas & Andrew Clark & Yannis Georgellis & Ed Diener, 2002. "Re-Examining Adaptation and the Setpoint Model of Happiness: Reactions to Changes in Marital Status," DELTA Working Papers 2002-08, DELTA (Ecole normale supérieure). [Downloadable!]
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  24. Winkelmann, Liliana & Winkelmann, Rainer, 1998. "Why Are the Unemployed So Unhappy? Evidence from Panel Data," Economica, London School of Economics and Political Science, vol. 65(257), pages 1-15, February. [Downloadable!] (restricted)
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    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Oswald, Andrew J., 2008. "On the Curvature of the Reporting Function from Objective Reality to Subjective Feelings," IZA Discussion Papers 3344, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. Andrew E. Clark, 2008. "Happiness, habits and high rank: Comparisons in economic and social life," PSE Working Papers 2008-61, PSE (Ecole normale supérieure). [Downloadable!]
  3. Gardner, Jonathan & Oswald, Andrew J., 2006. "Money and Mental Wellbeing : A Longitudinal Study of Medium-Sized Lottery Wins," The Warwick Economics Research Paper Series (TWERPS) 754, University of Warwick, Department of Economics. [Downloadable!]
    Other versions:
  4. Oswald, Andrew J. & Powdthavee, Nattavudh, 2007. "Death, Happiness, and the Calculation of Compensatory Damages," The Warwick Economics Research Paper Series (TWERPS) 827, University of Warwick, Department of Economics. [Downloadable!]
    Other versions:
  5. Nils Braakmann, 2009. "Other-Regarding Preferences, Spousal Disability and Happiness: Evidence from German Couples," SOEPpapers 194, DIW Berlin, The German Socio-Economic Panel (SOEP). [Downloadable!]
    Other versions:
  6. Liam Graham & Andrew J. Oswald, 2006. "Hedonic Capital," IZA Discussion Papers 2079, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  7. Andreas Knabe & Steffen Rätzel & Ronnie Schöb & Joachim Weimann, 2009. "Dissatisfied with Life, but Having a Good Day: Time-Use and Well-Being of the Unemployed," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  8. Andrew J. Oswald & Nattavudh Powdthavee, 2007. "Obesity, Unhappiness, and The Challenge of Affluence: Theory and Evidence," IZA Discussion Papers 2717, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  9. Bert G.M. Van Landeghem, 2008. "Human Well-Being over the Life Cycle: Longitudinal Evidence from a 20-Year Panel," LICOS Discussion Papers 21308, LICOS - Centre for Institutions and Economic Performance, K.U.Leuven. [Downloadable!]
  10. N Powdthavee, 2008. "Ill-Health as a Household Norm: Evidence from Other People's Health Problems," Discussion Papers 08/21, Department of Economics, University of York. [Downloadable!]
  11. Blanchflower, David G. & Oswald, Andrew J., 2007. "Is Well-being U-Shaped over the Life Cycle?," The Warwick Economics Research Paper Series (TWERPS) 826, University of Warwick, Department of Economics. [Downloadable!]
    Other versions:
  12. Nattavudh Powdthavee, . "Jobless, Friendless, and Broke: What Happens to Different Areas of Life Before and After Unemployment?," Discussion Papers 09/15, Department of Economics, University of York. [Downloadable!]
  13. Luis Angeles, 2008. "Adaption or social comparison? The effects of income on happiness," Working Papers 2009_09, Department of Economics, University of Glasgow, revised Jun 2009. [Downloadable!]
  14. Frijters, Paul & Johnston, David W. & Shields, Michael A., 2008. "Happiness Dynamics with Quarterly Life Event Data," IZA Discussion Papers 3604, Institute for the Study of Labor (IZA). [Downloadable!]
  15. Martin Binder & Alex Coad, 2009. "An Examination of the Dynamics of Happiness Using Vector Autoregressions," Papers on Economics and Evolution 2009-04, Max Planck Institute of Economics, Evolutionary Economics Group. [Downloadable!]
  16. Georgios Kavetsos & Stefan Szymanski, 2008. "National Wellbeing and International Sports Events," Working Papers 0804, International Association of Sports Economists. [Downloadable!]
  17. Nattavudh Powdthavee, 2009. "Estimating the Causal Effects of Income on Happiness," Discussion Papers 09/02, Department of Economics, University of York. [Downloadable!]
  18. Arik Levinson, 2009. "Valuing Public Goods Using Happiness Data: The Case of Air Quality," Working Papers gueconwpa~09-09-03, Georgetown University, Department of Economics. [Downloadable!]
    Other versions:
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