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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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    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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