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The dynamics of perception: modelling subjective wellbeing in a short panel

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  • Stephen Pudney

Abstract

We consider the issue of the dynamics of perceptions, as expressed in responses to survey questions on subjective wellbeing. We develop a simulated maximum likelihood method for estimation of dynamic linear models, where the dependent variable is partially observed through ordinal scales. This latent auto-regression model is often more appropriate than the usual state dependence model for attitudinal and interval variables. The paper contains an application to a model of households' perceptions of their financial wellbeing, demonstrating the superior fit of the latent auto-regression model to both the usual static model and the state dependence model. Copyright 2008 Royal Statistical Society.

Suggested Citation

  • Stephen Pudney, 2008. "The dynamics of perception: modelling subjective wellbeing in a short panel," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 171(1), pages 21-40.
  • Handle: RePEc:bla:jorssa:v:171:y:2008:i:1:p:21-40
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    References listed on IDEAS

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    1. Olympia Bover & Manuel Arellano, 1997. "Estimating limited dependent variable models from panel data," Investigaciones Economicas, Fundación SEPI, vol. 21(2), pages 141-166, May.
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    Cited by:

    1. Giarda, Elena, 2013. "Persistency of financial distress amongst Italian households: Evidence from dynamic models for binary panel data," Journal of Banking & Finance, Elsevier, vol. 37(9), pages 3425-3434.
    2. Alessio Fusco, 2016. "The Dynamics of Perceived Financial Difficulties," Journal of Happiness Studies, Springer, vol. 17(4), pages 1599-1614, August.
    3. Rafael Sánchez, 2017. "Does a Mandatory Reduction of Standard Working Hours Improve Employees' Health Status?," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 56(1), pages 3-39, January.
    4. Chrostek, Pawel, 2013. "An empirical investigation into the determinants and persistence of happiness and life evaluation," MPRA Paper 50442, University Library of Munich, Germany.
    5. Ayllón, Sara & Fusco, Alessio, 2017. "Are income poverty and perceptions of financial difficulties dynamically interrelated?," Journal of Economic Psychology, Elsevier, vol. 61(C), pages 103-114.
    6. Wiji Arulampalam & Mark B. Stewart, 2009. "Simplified Implementation of the Heckman Estimator of the Dynamic Probit Model and a Comparison with Alternative Estimators," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(5), pages 659-681, October.
    7. Orcun Kaya, 2014. "Is perceived financial inadequacy persistent?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(4), pages 636-654, December.
    8. Christoph Wunder & Johannes Schwarze, 2010. "What (If Anything) Do Satisfaction Scores Tell Us about the Intertemporal Change in Living Conditions," SOEPpapers on Multidisciplinary Panel Data Research 306, DIW Berlin, The German Socio-Economic Panel (SOEP).
    9. John Roy & Stefanie Schurer, 2013. "Getting Stuck In The Blues: Persistence Of Mental Health Problems In Australia," Health Economics, John Wiley & Sons, Ltd., vol. 22(9), pages 1139-1157, September.
    10. Pudney, Stephen, 2011. "Perception and retrospection: The dynamic consistency of responses to survey questions on wellbeing," Journal of Public Economics, Elsevier, vol. 95(3), pages 300-310.
    11. Carol Newman & Liam Delaney & Brian Nolan, 2008. "A Dynamic Model of the Relationship Between Income and Financial Satisfaction: Evidence from Ireland," The Economic and Social Review, Economic and Social Studies, vol. 39(2), pages 105-130.
    12. Lorenzo Cappellari & Stephen P. Jenkins, 2008. "Estimating low pay transition probabilities accounting for endogenous selection mechanisms," Journal of the Royal Statistical Society Series C, Royal Statistical Society, vol. 57(2), pages 165-186.
    13. Wunder, Christoph, 2012. "Does subjective well-being dynamically adjust to circumstances?," Economics Letters, Elsevier, vol. 117(3), pages 750-752.
    14. Fabrice Etilé & Paul Frijters & David W. Johson & Michael A. Shields, 2017. "Modelling Heterogeneity in the Resilience to Major Socioeconomic Life Events," PSE Working Papers halshs-01485989, HAL.
    15. Paweł Chrostek, 2016. "An Empirical Investigation into the Determinants and Persistence of Happiness and Life Evaluation," Journal of Happiness Studies, Springer, vol. 17(1), pages 413-430, February.

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