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Dynamic Analysis and the Economics of Happiness: Rationale, Results and Rules

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  • Piper, Alan T.

Abstract

This paper provides a sustained introduction for the use of dynamic panel methods when analysing life satisfaction. As well as being able to address the issue of serial correlation, dynamic panel analysis also has the advantage of being able to treat variables as exogenous or endogenous, important for happiness, and can generate both contemporaneous and long run estimates for independent variables. A key result found initially for young people, but which is robust to different age ranges and countries, is that happiness is largely contemporaneous although there is a small, persistent effect of the past on current happiness. Additionally, decision rules are provided for the analysis of happiness using dynamic panel analysis.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 43248.

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Date of creation: Jun 2012
Date of revision: Dec 2012
Handle: RePEc:pra:mprapa:43248

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Keywords: Dynamic Panel Analysis; Happiness; Life Satisfaction;

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References

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  1. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
  2. David G. Blanchflower & Andrew J. Oswald, 1997. "The Rising Well-Being of the Young," NBER Working Papers 6102, National Bureau of Economic Research, Inc.
  3. David M. Drukker, 2003. "Testing for serial correlation in linear panel-data models," Stata Journal, StataCorp LP, vol. 3(2), pages 168-177, June.
  4. Di Tella, R. & MacCulloch, R.J.: Oswald, A.J., 1997. "The Macroeconomics of Happiness," Papers 19, Centre for Economic Performance & Institute of Economics.
  5. 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.
  6. 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.
  7. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  8. Lelkes, Orsolya, 2008. "Happiness over the life cycle: exploring age-specific preferences," MPRA Paper 7302, University Library of Munich, Germany.
  9. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
  10. Nattavudh Powdthavee, 2009. "Estimating the Causal Effects of Income on Happiness," Discussion Papers 09/02, Department of Economics, University of York.
  11. Bottan, Nicolas Luis & Perez Truglia, Ricardo, 2011. "Deconstructing the hedonic treadmill: Is happiness autoregressive?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(3), pages 224-236, May.
  12. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, vol. 9(1), pages 86-136, March.
  13. George MacKerron, 2012. "Happiness Economics From 35 000 Feet," Journal of Economic Surveys, Wiley Blackwell, vol. 26(4), pages 705-735, 09.
  14. Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, vol. 104(424), pages 648-59, May.
  15. Blanchflower, David G., 2001. "Unemployment, Well-Being, and Wage Curves in Eastern and Central Europe," Journal of the Japanese and International Economies, Elsevier, vol. 15(4), pages 364-402, December.
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Cited by:
  1. Piper, Alan T., 2012. "Heaven knows I’m miserable now: overeducation and reduced life satisfaction," MPRA Paper 46926, University Library of Munich, Germany, revised May 2013.
  2. Chrostek, Pawel, 2013. "An empirical investigation into the determinants and persistence of happiness and life evaluation," MPRA Paper 50442, University Library of Munich, Germany.
  3. Piper, Alan T., 2013. "Happiness, Dynamics and Adaptation," MPRA Paper 52342, University Library of Munich, Germany.
  4. Chrostek, Pawel, 2013. "An empirical investigation into the determinants and persistence of different types of subjective well-being," MPRA Paper 48292, University Library of Munich, Germany.
  5. Piper, Alan T., 2013. "Europe’s capital cities and the happiness penalty: an investigation using the European Social Survey," MPRA Paper 47793, University Library of Munich, Germany.
  6. Piper, Alan, 2013. "A Note on Modelling Dynamics in Happiness Estimations," MPRA Paper 49364, University Library of Munich, Germany.

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