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The dynamics of perception: modelling subjective well-being in a short panel

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  • Pudney, Stephen

Abstract

We consider the neglected issue of the dynamics of perceptions, as expressed in responses to survey questions on subjective well-being. We develop a simulated ML method for estimation for dynamic linear models, where the dependent variable is partially observed through ordinal scales. This latent autoregression (LAR) model is often more appropriate than the usual state-dependence (SD) model for attitudinal and interval variables. The paper contains an application to a model of households’ perceptions of their financial well-being, demonstrating the superior fit of the LAR model to both the usual static model and the SD model.

Suggested Citation

  • Pudney, Stephen, 2006. "The dynamics of perception: modelling subjective well-being in a short panel," ISER Working Paper Series 2006-27, Institute for Social and Economic Research.
  • Handle: RePEc:ese:iserwp:2006-27
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    File URL: https://www.iser.essex.ac.uk/research/publications/working-papers/iser/2006-27.pdf
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    1. Olympia Bover & Manuel Arellano, 1997. "Estimating limited dependent variable models from panel data," Investigaciones Economicas, Fundación SEPI, vol. 21(2), pages 141-166, May.
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    Cited by:

    1. Giarda, Elena, 2013. "Persistency of financial distress amongst Italian households: Evidence from dynamic models for binary panel data," Journal of Banking & Finance, Elsevier, vol. 37(9), pages 3425-3434.
    2. Rafael Sánchez, 2017. "Does a Mandatory Reduction of Standard Working Hours Improve Employees' Health Status?," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 56(1), pages 3-39, January.
    3. Ayllón, Sara & Fusco, Alessio, 2017. "Are income poverty and perceptions of financial difficulties dynamically interrelated?," Journal of Economic Psychology, Elsevier, vol. 61(C), pages 103-114.
    4. Wiji Arulampalam & Mark B. Stewart, 2009. "Simplified Implementation of the Heckman Estimator of the Dynamic Probit Model and a Comparison with Alternative Estimators," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(5), pages 659-681, October.
    5. Christoph Wunder & Johannes Schwarze, 2010. "What (If Anything) Do Satisfaction Scores Tell Us about the Intertemporal Change in Living Conditions," SOEPpapers on Multidisciplinary Panel Data Research 306, DIW Berlin, The German Socio-Economic Panel (SOEP).
    6. Carol Newman & Liam Delaney & Brian Nolan, 2008. "A Dynamic Model of the Relationship Between Income and Financial Satisfaction: Evidence from Ireland," The Economic and Social Review, Economic and Social Studies, vol. 39(2), pages 105-130.
    7. Lorenzo Cappellari & Stephen P. Jenkins, 2008. "Estimating low pay transition probabilities accounting for endogenous selection mechanisms," Journal of the Royal Statistical Society Series C, Royal Statistical Society, vol. 57(2), pages 165-186.
    8. John Roy & Stefanie Schurer, 2013. "Getting Stuck In The Blues: Persistence Of Mental Health Problems In Australia," Health Economics, John Wiley & Sons, Ltd., vol. 22(9), pages 1139-1157, September.
    9. Pudney, Stephen, 2011. "Perception and retrospection: The dynamic consistency of responses to survey questions on wellbeing," Journal of Public Economics, Elsevier, vol. 95(3-4), pages 300-310, April.
    10. Wunder, Christoph, 2012. "Does subjective well-being dynamically adjust to circumstances?," Economics Letters, Elsevier, vol. 117(3), pages 750-752.
    11. Fabrice Etilé & Paul Frijters & David W. Johson & Michael A. Shields, 2017. "Modelling Heterogeneity in the Resilience to Major Socioeconomic Life Events," PSE Working Papers halshs-01485989, HAL.
    12. Paweł Chrostek, 2016. "An Empirical Investigation into the Determinants and Persistence of Happiness and Life Evaluation," Journal of Happiness Studies, Springer, vol. 17(1), pages 413-430, February.
    13. Alessio Fusco, 2016. "The Dynamics of Perceived Financial Difficulties," Journal of Happiness Studies, Springer, vol. 17(4), pages 1599-1614, August.
    14. Chrostek, Pawel, 2013. "An empirical investigation into the determinants and persistence of happiness and life evaluation," MPRA Paper 50442, University Library of Munich, Germany.
    15. Orcun Kaya, 2014. "Is perceived financial inadequacy persistent?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(4), pages 636-654, December.

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