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(Mis-)Predicted Subjective Well-Being Following Life Events

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  • Reto Odermatt
  • Alois Stutzer

Abstract

The correct prediction of how alternative states of the world affect our lives is a cornerstone of economics. We study how accurate people are in predicting their future well-being after facing major life events. Based on individual panel data, we compare people's life satisfaction forecasts reported in the first interview after a major life event with their actual evaluations five years later on. This is done after the individuals experience widowhood, unemployment, disability, marriage, separation or divorce. We find systematic prediction errors that seem at least partly driven by unforeseen adaptation after the first four of these events.

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  • Reto Odermatt & Alois Stutzer, 2017. "(Mis-)Predicted Subjective Well-Being Following Life Events," CREMA Working Paper Series 2017-12, Center for Research in Economics, Management and the Arts (CREMA).
  • Handle: RePEc:cra:wpaper:2017-12
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. The impact bias against Labour
      by chris in Stumbling and Mumbling on 2017-09-29 17:51:17
    2. (Mis-)Predicted Subjective Well-Being Following Life Events
      by maximorossi in NEP-LTV blog on 2015-09-09 17:26:29

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    6. Odermatt, Reto & Stutzer, Alois, 2020. "Does the Dream of Home Ownership Rest upon Biased Beliefs? A Test Based on Predicted and Realized Life Satisfaction," IZA Discussion Papers 13510, Institute of Labor Economics (IZA).
    7. Hielke Buddelmeyer & Daniel S. Hamermesh & Mark Wooden, 2015. "The Stress Cost of Children," Melbourne Institute Working Paper Series wp2015n01, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    8. Clark, Andrew E. & Díaz Serrano, Lluís, 2020. "The Long-run Effects of Housing on Well-Being," Working Papers 2072/376033, Universitat Rovira i Virgili, Department of Economics.
    9. Odermatt, Reto & Powdthavee, Nattavudh & Stutzer, Alois, 2017. "Overoptimistic Entrepreneurs: Predicting Wellbeing Consequences of Self-Employment," IZA Discussion Papers 11098, Institute of Labor Economics (IZA).
    10. Marco Bertoni & Luca Corazzini, 2018. "Asymmetric affective forecasting errors and their correlation with subjective well-being," PLOS ONE, Public Library of Science, vol. 13(3), pages 1-22, March.
    11. Chadi, Adrian & de Pinto, Marco & Schultze, Gabriel, 2019. "Young, gifted and lazy? The role of ability and labor market prospects in student effort decisions," Economics of Education Review, Elsevier, vol. 72(C), pages 66-79.
    12. Kaufmann, Marc & Machado, Joël & Verheyden, Bertrand, 2021. "Why Do Migrants Stay Unexpectedly? Misperceptions and Implications for Integration," IZA Discussion Papers 14155, Institute of Labor Economics (IZA).
    13. Akay, Alpaslan & Bargain, Olivier B. & Jara, Xavier, 2017. "‘Fair’ Welfare Comparisons with Heterogeneous Tastes: Subjective versus Revealed Preferences," Working Papers in Economics 707, University of Gothenburg, Department of Economics.
    14. Bruno S. Frey & Anthony Gullo, 2021. "Does Sports Make People Happier, or Do Happy People More Sports?," Journal of Sports Economics, , vol. 22(4), pages 432-458, May.
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    17. Akay, Alpaslan & Bargain, Olivier B. & Jara, H. Xavier, 2017. "Back to Bentham, Should We? Large-Scale Comparison of Experienced versus Decision Utility," GLO Discussion Paper Series 52, Global Labor Organization (GLO).
    18. María Navarro, 2019. "Financial, Job and Health Satisfaction: A Comparative Approach on Working People," Societies, MDPI, Open Access Journal, vol. 9(2), pages 1-17, April.
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    20. Kossuth, Lajos & Powdthavee, Nattavudh & Harris, Donna & Chater, Nick, 2020. "Does it pay to bet on your favourite to win? Evidence on experienced utility from the 2018 FIFA World Cup experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 171(C), pages 35-58.
    21. Bartosz Wilczek, 2018. "Media use and life satisfaction: the moderating role of social events," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 65(2), pages 157-184, June.
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    23. O'Connor, Kelsey J. & Graham, Carol, 2019. "Longer, more optimistic, lives: Historic optimism and life expectancy in the United States," Journal of Economic Behavior & Organization, Elsevier, vol. 168(C), pages 374-392.
    24. Maximilian W. Mueller & Joan Hamory Hicks & Jennifer Johnson-Hanks & Edward Miguel, 2019. "The Illusion of Stable Preferences over Major Life Decisions," NBER Working Papers 25844, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    Adaptation; life satisfaction; life events; projection-bias; subjective well-being; utility prediction; unemployement;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D60 - Microeconomics - - Welfare Economics - - - General
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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