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A Test for the Convexity of Human Well-Being over the Life Cycle: Longitudinal Evidence from a 20-Year Panel

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  • Landeghem Bert van

    (METEOR)

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    Abstract

    A huge cross-section literature, written by economists and others, argues that human well-being isU-shaped through the life cycle. In many cases this U-shape is robust (with as a well-knownexception the pattern evident in some U.S. data sets if few independent variables are included).However, a lively debate is currently ongoing about its true shape. This paper discusses the identi cation problem of age, time, and cohort e ects. It suggests a simple way to interpretestimates of age variables in a rst-di erence framework. Building on McKenzie''s (2006) methodology,the paper shows that no extra assumptions are needed in order to identify the second derivative ofwell-being to age, i.e. to estimate the changes in changes in the actual age and well-beingrelationship. An empirical application, using a large German data set, nds that human well-beingis convex in age until after midlife, which is approximately consistent with a U-shaped patternthrough life, and not with the concave relationship sometimes found in U.S. studies.

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    Bibliographic Info

    Paper provided by Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR) in its series Research Memorandum with number 043.

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    Date of creation: 2011
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    Handle: RePEc:unm:umamet:2011043

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    Keywords: labour economics ;

    References

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    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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    1. Shmanske, Stephen, 1997. "Life-Cycle Happiness in a Discounted Utility Model," Kyklos, Wiley Blackwell, vol. 50(3), pages 383-407.
    2. Peter Sanfey & Utku Teksoz, 2005. "Does transition make you happy?," Working Papers 91, European Bank for Reconstruction and Development, Office of the Chief Economist.
    3. Stevenson, Betsey & Wolfers, Justin, 2009. "The Paradox of Declining Female Happiness," CEPR Discussion Papers 7311, C.E.P.R. Discussion Papers.
    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. Powdthavee, Nattavudh, 2003. "Unhappiness and Crime : Evidence from South Africa," The Warwick Economics Research Paper Series (TWERPS) 685, University of Warwick, Department of Economics.
    6. Clark, Andrew E. & Oswald, Andrew J., 1996. "Satisfaction and comparison income," Journal of Public Economics, Elsevier, vol. 61(3), pages 359-381, September.
    7. repec:pri:cheawb:stone_schwartz_broderick_deaton_snapshot_of_the_age_distribution_of_psych is not listed on IDEAS
    8. Bruno S. Frey & Alois Stutzer, 2001. "What Can Economists Learn from Happiness Research?," CESifo Working Paper Series 503, CESifo Group Munich.
    9. Deaton, Angus, 1985. "Panel data from time series of cross-sections," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 109-126.
    10. Deaton, A. & Paxson, C., 1993. "Intertemporal Choice and Inequality," Papers 168, Princeton, Woodrow Wilson School - Development Studies.
    11. Robert J. MacCulloch & Rafael Di Tella & Andrew J. Oswald, 2001. "Preferences over Inflation and Unemployment: Evidence from Surveys of Happiness," American Economic Review, American Economic Association, vol. 91(1), pages 335-341, March.
    12. Krueger, Alan B. & Schkade, David A., 2007. "The Reliability of Subjective Well-Being Measures," IZA Discussion Papers 2724, Institute for the Study of Labor (IZA).
    13. Senik, Claudia, 2008. "Is man doomed to progress?," Journal of Economic Behavior & Organization, Elsevier, vol. 68(1), pages 140-152, October.
    14. Angus S. Deaton & Christina Paxson, 1994. "Saving, Growth, and Aging in Taiwan," NBER Chapters, in: Studies in the Economics of Aging, pages 331-362 National Bureau of Economic Research, Inc.
    15. Rafael Di Tella & Robert MacCulloch, 2006. "Some Uses of Happiness Data in Economics," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 25-46, Winter.
    16. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
    17. FLEURBAEY, Marc & SCHOKKAERT, Erik & DECANCQ, Koen, 2009. "What good is happiness?," CORE Discussion Papers 2009017, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    18. Oswald, Andrew J. & Powdthavee, Nattavudh, 2007. "Obesity, Unhappiness, and The Challenge of Affluence: Theory and Evidence," IZA Discussion Papers 2717, Institute for the Study of Labor (IZA).
    19. Jonathan Heathcote & Kjetil Storesletten & Giovanni L. Violante, 2005. "Two Views of Inequality Over the Life Cycle," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 765-775, 04/05.
    20. 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.
    21. Fischer, Justina AV, 2009. "Happiness and age cycles – return to start…," MPRA Paper 15249, University Library of Munich, Germany.
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    Cited by:
    1. Gregori Baetschmann, 2011. "Heterogeneity in the relationship between happiness and age: Evidence from the German Socio-Economic Panel," ECON - Working Papers 047, Department of Economics - University of Zurich.
    2. Gregori Baetschmann, 2012. "Heterogeneity in the Relationship between Happiness and Age: Evidence from the German Socio-Economic Panel," SOEPpapers on Multidisciplinary Panel Data Research 472, DIW Berlin, The German Socio-Economic Panel (SOEP).

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