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Economic Shocks and Subjective Well-Being: Evidence from a Quasi-Experiment

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  • Jacob Gerner Hariri
  • Christian Bjørnskov
  • Mogens K. Justesen

Abstract

This article examines how economic shocks affect individual well-being in developing countries. Using the case of a sudden and unanticipated currency devaluation in Botswana as a quasi-experiment, we examine how this monetary shock affects individuals' evaluations of well-being. We do so by using microlevel survey data, which—incidentally—were collected in the days surrounding the devaluation. The chance occurrence of the devaluation during the time of the survey enables us to use pretreatment respondents, surveyed before the devaluation, as approximate counterfactuals for post-treatment respondents, surveyed after the devaluation. Our estimates show that the devaluation had a large and significantly negative effect on individuals' evaluations of subjective well-being. These results suggest that macroeconomic shocks, such as unanticipated currency devaluations, may have significant short-term costs in the form of reductions in people's sense of well-being.

Suggested Citation

  • Jacob Gerner Hariri & Christian Bjørnskov & Mogens K. Justesen, 2016. "Economic Shocks and Subjective Well-Being: Evidence from a Quasi-Experiment," The World Bank Economic Review, World Bank, vol. 30(1), pages 55-77.
    • Handle: RePEc:oup:wbecrv:v:30:y:2016:i:1:p:55-77.
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    File URL: http://hdl.handle.net/10.1093/wber/lhv004
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    Cited by:

    1. Zhihua Wu & Bing Liao & Qing Fu & Chongyi Qi & Wenmei Liao, 2025. "Agricultural Machinery Adoption and Farmers’ Well-Being: Evidence from Jiangxi Province," Agriculture, MDPI, vol. 15(7), pages 1-20, March.
    2. Sibylle Puntscher & Janette Walde & Gottfried Tappeiner, 2016. "Do methodical traps lead to wrong development strategies for welfare? A multilevel approach considering heterogeneity across industrialized and developing countries," Working Papers 2016-01, Faculty of Economics and Statistics, Universität Innsbruck.
    3. Powell-Jackson, Timothy & Pereira, Shreya K. & Dutt, Varun & Tougher, Sarah & Haldar, Kaveri & Kumar, Paresh, 2016. "Cash transfers, maternal depression and emotional well-being: Quasi-experimental evidence from India’s Janani Suraksha Yojana programme," Social Science & Medicine, Elsevier, vol. 162(C), pages 210-218.
    4. Jessica Nguyen & Tue Dinh & Marcus Selart, 2025. "The Predicting Abilities of Social Trust and Good Governance on Economic Crisis Duration," Administrative Sciences, MDPI, vol. 15(4), pages 1-16, March.
    5. Elinder, Mikael & Erixson, Oscar & Hammar, Olle, 2024. "How Has the War in Ukraine Affected Russian Sentiments?," Working Papers in Economics and Statistics 14/2024, Linnaeus University, School of Business and Economics, Department of Economics and Statistics.
    6. De, Prabal K. & Thamarapani, Dhanushka, 2022. "Impacts of negative shocks on wellbeing and aspirations – Evidence from an earthquake," World Development, Elsevier, vol. 154(C).
    7. repec:spo:wpmain:info:hdl:2441/7fst0pcf5j8cr99e1nuobt97rn is not listed on IDEAS
    8. Emilio Colombo & Valentina Rotondi & Luca Stanca, 2018. "Macroeconomic conditions and well-being: do social interactions matter?," Applied Economics, Taylor & Francis Journals, vol. 50(28), pages 3029-3038, June.
    9. Sergei Guriev & Ekaterina Zhuravskaya, 2009. "(Un)happiness in Transition," Journal of Economic Perspectives, American Economic Association, vol. 23(2), pages 143-168, Spring.
    10. Efstratia Arampatzi & Martijn Burger & Spyridon Stavropoulos & Louis Tay, 2020. "The Role of Positive Expectations for Resilience to Adverse Events: Subjective Well-Being Before, During and After the Greek Bailout Referendum," Journal of Happiness Studies, Springer, vol. 21(3), pages 965-995, March.

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