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What (If Anything) Do Satisfaction Scores Tell Us about the Intertemporal Change in Living Conditions

  • Christoph Wunder
  • Johannes Schwarze
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    This paper looks at the information content of satisfaction scores. It is argued that the information content depends on the extent to which people adapt to living conditions in general. Using data from the German Socio-Economic Panel Study (SOEP), the estimation of a dynamic panel data model provides evidence that adaptation takes place within a relatively short window of time: changes in living conditions are, for the most part, absorbed by an adjustment of the adaptation level within one year. This leads to the conclusion that the information content of satisfaction scores accentuates recent changes in living conditions. Remote changes are notcaptured by the according survey questions, even if these changes have long-term impact on living conditions. The usefulness of satisfaction scores as an indicator of people's living conditions is discussed.

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    File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.357660.de/diw_sp0306.pdf
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    Paper provided by DIW Berlin, The German Socio-Economic Panel (SOEP) in its series SOEPpapers on Multidisciplinary Panel Data Research with number 306.

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    Length: 13 p.
    Date of creation: 2010
    Date of revision:
    Handle: RePEc:diw:diwsop:diw_sp306
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    1. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2008. "Relative income, happiness, and utility: An explanation for the Easterlin paradox and other puzzles," Post-Print halshs-00754299, HAL.
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    7. Denis Huschka & Gert G. Wagner, 2010. "Sind Indikatoren zur Lebensqualität und zur Lebenszufriedenheit als politische Zielgrößen sinnvoll?," SOEPpapers on Multidisciplinary Panel Data Research 275, DIW Berlin, The German Socio-Economic Panel (SOEP).
    8. Thomas Siedler & JÜrgen Schupp & C. Katharina Spiess & Gert G. Wagner, 2009. "The German Socio-Economic Panel (SOEP) as Reference Data Set," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 129(2), pages 367-374.
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    11. Ed Diener & Robert Biswas-Diener, 2002. "Will Money Increase Subjective Well-Being?," Social Indicators Research- An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 57(2), pages 119-169, February.
    12. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
    13. Oswald, A.J., 1997. "Happiness and Economic Performance," Papers 18, Centre for Economic Performance & Institute of Economics.
    14. Alex Michalos, 1985. "Multiple discrepancies theory (MDT)," Social Indicators Research- An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 16(4), pages 347-413, May.
    15. Paul Dolan & Tessa Peasgood, 2008. "Measuring Well-Being for Public Policy: Preferences or Experiences?," The Journal of Legal Studies, University of Chicago Press, vol. 37(S2), pages S5-S31, 06.
    16. Christoph Wunder, 2009. "Adaptation to Income over Time: A Weak Point of Subjective Well-Being," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 129(2), pages 269-281.
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