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Reversing the question. Does happiness affect consumption and savings behavior?

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  • Guven, Cahit

Abstract

This paper attempts to answer an interesting but empirically challenging question: Do changes in well-being (life satisfaction or happiness) lead to changes in consumption and savings behavior? The paper uses regional sunshine as an instrument for personal happiness using the Dutch Household Survey from the Netherlands. Sunshine improves happiness significantly. Instrumenting happiness with sunshine, happier people are found to save more, spend less, and have a lower marginal propensity to consume. Happier people take more time for making decisions and have more control over expenditures; they expect a longer life and (accordingly) seem more concerned about the future than the present; they also expect less inflation in the future.
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Suggested Citation

  • Guven, Cahit, 2008. "Reversing the question. Does happiness affect consumption and savings behavior?," Working Papers eco_2008_20, Deakin University, Department of Economics.
    • Handle: RePEc:dkn:econwp:eco_2008_20
    DOI: 10.1016/j.joep.2012.01.002
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    File URL: http://dx.doi.org/10.1016/j.joep.2012.01.002
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    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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