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Perception and retrospection: The dynamic consistency of responses to survey questions on wellbeing

  • Pudney, Stephen

Implementation of broad approaches to welfare analysis usually entails the use of 'subjective' welfare indicators. We analyse BHPS data on financial wellbeing to determine whether reported current and retrospective perceptions are consistent with each other and with the existence of a common underlying wellbeing concept. We allow for adjustment of perceptions in a vector ARMA model for panel data, with dependent variables observed ordinally and find that current perceptions exhibit slow adjustment to changing circumstances and retrospective assessments of past wellbeing are heavily contaminated by current circumstances, causing significant bias in measures of the level and change in welfare.

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File URL: http://www.sciencedirect.com/science/article/B6V76-50V5NGW-2/2/ef51fc9af7bb917128aac02de7361e15
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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 95 (2011)
Issue (Month): 3-4 (April)
Pages: 300-310

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Handle: RePEc:eee:pubeco:v:95:y:2011:i:3-4:p:300-310
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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