Deconstructing the Hedonic Treadmill: Is Happiness Autoregressive?
AbstractAffective habituation is well-documented in social sciences: people seem to adapt to many life events, ranging from lottery windfalls to terminal illnesses. We propose a subtle but critical difference: current happiness may depend directly on past happiness. We test our hypothesis running dynamic happiness regressions using panel data from the German Socio-Economic Panel Study, the British Household Panel Survey and the Swiss Household Panel. Contrary to the widespread prior among economists and non-economists, the coefficient on lagged happiness is positive and statistically significant. We discuss some explanations for the puzzle. Our favorite is that reported happiness is time-inconsistent, even within individuals. We test this conjecture by using a 52-days study. As expected, the coefficient on lagged happiness is negative and statistically significant. We find that changes in hedonic states bounce back 30% in only 5 days.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 20340.
Date of creation: Jun 2008
Date of revision:
happiness; autoregressive; adaptation; dynamic panel;
Find related papers by JEL classification:
- I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- I00 - Health, Education, and Welfare - - General - - - General
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