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Perception and retrospection: the dynamic consistency of responses to survey questions on wellbeing

  • Pudney, Stephen

Implementation of broad approaches to welfare analysis usually entails the use of 'subjective' welfare indicators. We analyse BHPS data on financial wellbeing to determine whether reported current and retrospective perceptions are consistent with each other and with the existence of a common underlying wellbeing concept. We allow for adjustment of perceptions in a vector ARMA model for panel data, with dependent variables observed ordinally and find that current perceptions exhibit slow adjustment to changing circumstances and retrospective assessments of past wellbeing are heavily contaminated by current circumstances, causing significant bias in measures of the level and change in welfare.

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File URL: https://www.iser.essex.ac.uk/research/publications/working-papers/iser/2010-07.pdf
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Paper provided by Institute for Social and Economic Research in its series ISER Working Paper Series with number 2010-07.

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Date of creation: 15 Mar 2010
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Publication status: published
Handle: RePEc:ese:iserwp:2010-07
Contact details of provider: Postal: Publications Office, Institute for Social and Economic Research, University of Essex, Wivenhoe Park, Colchester, Essex CO4 3SQ UK
Phone: 44-1206-872957
Fax: 44-1206-873151
Web page: https://www.iser.essex.ac.uk/
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  1. Loewenstein, George & Ubel, Peter A., 2008. "Hedonic adaptation and the role of decision and experience utility in public policy," Journal of Public Economics, Elsevier, vol. 92(8-9), pages 1795-1810, August.
  2. Hajivassiliou, Vassilis A & Ruud, Paul A., 1993. "Classical Estimation Methods for LDV Models Using Simulation," Department of Economics, Working Paper Series qt3cg196fr, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  3. J. Dominitz & C. F. Manski, . "Using expectations data to study subjective income expectations," Institute for Research on Poverty Discussion Papers 1050-94, University of Wisconsin Institute for Research on Poverty.
  4. Goffe, William L. & Ferrier, Gary D. & Rogers, John, 1994. "Global optimization of statistical functions with simulated annealing," Journal of Econometrics, Elsevier, vol. 60(1-2), pages 65-99.
  5. Stephen Pudney, 2008. "The dynamics of perception: modelling subjective wellbeing in a short panel," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 171(1), pages 21-40.
  6. John Muellbauer & Anthony Murphy, 2008. "Housing markets and the economy: the assessment," Oxford Review of Economic Policy, Oxford University Press, vol. 24(1), pages 1-33, spring.
  7. repec:ese:iserwp:2006-35 is not listed on IDEAS
  8. Ada Ferrer-i-Carbonell & Paul Frijters, 2004. "How Important is Methodology for the estimates of the determinants of Happiness?," Economic Journal, Royal Economic Society, vol. 114(497), pages 641-659, 07.
  9. Gabriella Conti & Stephen Pudney, 2011. "Survey Design and the Analysis of Satisfaction," The Review of Economics and Statistics, MIT Press, vol. 93(3), pages 1087-1093, August.
  10. Ravallion, Martin & Lokshin, Michael, 2000. "Identifying welfare effects from subjective questions," Policy Research Working Paper Series 2301, The World Bank.
  11. Henley, Andrew, 1998. "Changes in the Distribution of Housing Wealth in Great Britain, 1985-91," Economica, London School of Economics and Political Science, vol. 65(259), pages 363-80, August.
  12. repec:ese:iserwp:2007-15 is not listed on IDEAS
  13. Erik Schokkaert, 2007. "Capabilities and Satisfaction with Life," Journal of Human Development and Capabilities, Taylor & Francis Journals, vol. 8(3), pages 415-430.
  14. Paul Anand & Graham Hunter & Ian Carter & Keith Dowding & Francesco Guala & Martin Van Hees, 2009. "The Development of Capability Indicators," Journal of Human Development and Capabilities, Taylor & Francis Journals, vol. 10(1), pages 125-152.
  15. Bruce D. Meyer & James X. Sullivan, 2003. "Measuring the Well-Being of the Poor Using Income and Consumption," NBER Working Papers 9760, National Bureau of Economic Research, Inc.
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