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Unmet Aspirations as an Explanation for the Age U-shape in Human Wellbeing

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  • Schwandt, Hannes

    ()
    (Princeton University)

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    Abstract

    A large literature in behavioral and social sciences has found that human wellbeing follows a U-shape over age. Some theories have assumed that the U-shape is caused by unmet expectations that are felt painfully in midlife but beneficially abandoned and experienced with less regret during old age. In a unique panel of 132,609 life satisfaction expectations matched to subsequent realizations, I find people to err systematically in predicting their life satisfaction over the life cycle. They expect – incorrectly – increases in young adulthood and decreases during old age. These errors are large, ranging from 9.8% at age 21 to -4.5% at age 68, they are stable over time and observed across socio-economic groups. These findings support theories that unmet expectations drive the age U-shape in wellbeing.

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    Bibliographic Info

    Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7604.

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    Length: 34 pages
    Date of creation: Aug 2013
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    Handle: RePEc:iza:izadps:dp7604

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    Keywords: life satisfaction; expectations; aging;

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    1. David G. Blanchflower & Andrew Oswald, 2007. "Is Well-being U-Shaped over the Life Cycle?," NBER Working Papers 12935, National Bureau of Economic Research, Inc.
    2. Easterlin, Richard A, 2001. "Income and Happiness: Towards an Unified Theory," Economic Journal, Royal Economic Society, vol. 111(473), pages 465-84, July.
    3. Fuchs-Schundeln, Nicola & Alesina, Alberto, 2007. "Good-Bye Lenin (Or Not?): The Effect of Communism on People's Preferences," Scholarly Articles 4553032, Harvard University Department of Economics.
    4. Manju Puri & David Robinson, 2005. "Optimism and Economic Choice," NBER Working Papers 11361, National Bureau of Economic Research, Inc.
    5. Guy Mayraz, 2011. "Wishful Thinking," CEP Discussion Papers dp1092, Centre for Economic Performance, LSE.
    6. Paul Frijters & Tony Beatton, 2008. "The mystery of the U-shaped relationship between happiness and age," NCER Working Paper Series 26, National Centre for Econometric Research.
    7. Oswald, Andrew J. & Wu, Stephen, 2010. "Objective Confirmation of Subjective Measures of Human Well-being: Evidence from the USA," IZA Discussion Papers 4695, Institute for the Study of Labor (IZA).
    8. Daniel Kahneman & Richard H. Thaler, 2006. "Anomalies: Utility Maximization and Experienced Utility," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 221-234, Winter.
    9. 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.
    10. Ada Ferrer-i-Carbonell & Paul Frijters, 2002. "How important is Methodology for the Estimates of the Determinants of Happiness?," Tinbergen Institute Discussion Papers 02-024/3, Tinbergen Institute.
    11. Van Landeghem, Bert, 2012. "A test for the convexity of human well-being over the life cycle: Longitudinal evidence from a 20-year panel," Journal of Economic Behavior & Organization, Elsevier, vol. 81(2), pages 571-582.
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Happiness, age & class
      by chris dillow in Stumbling and Mumbling on 2014-03-01 14:27:31

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