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Poverty and Well-Being: Panel Evidence from Germany

  • Andrew E. Clark

    (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics, PSE - Paris-Jourdan Sciences Economiques - CNRS - Institut national de la recherche agronomique (INRA) - EHESS - École des hautes études en sciences sociales - ENS Paris - École normale supérieure - Paris - École des Ponts ParisTech (ENPC))

  • Conchita D'Ambrosio


    (Universita' di Milano-Bicocca - Universita' di Milano-Bicocca, DIW - Deutsches Institut für Wirtschaftsforschung - German Institute for Economic Research, Econpubblica - Università commerciale Luigi Bocconi)

  • Simone Ghislandi

    (Università commerciale Luigi Bocconi - Università commerciale Luigi Bocconi, Econpubblica - Università commerciale Luigi Bocconi)

We consider the link between poverty and subjective well-being, and focus in particular on the role of time. We use panel data on 42,500 individuals living in Germany from 1992 to 2010 to uncover four empirical relationships. First, life satisfaction falls with both the incidence and intensity of contemporaneous poverty. There is no evidence of adaptation within a poverty spell: poverty starts bad and stays bad in terms of subjective well-being. Third, poverty scars: those who have been poor in the past report lower life satisfaction today, even when out of poverty. Last, the order of poverty spells matters: for a given number of poverty spells, satisfaction is lower when the spells are concatenated: poverty persistence reduces well-being. These effects differ by population subgroups.

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Paper provided by HAL in its series PSE Working Papers with number hal-00814659.

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Date of creation: Apr 2013
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Handle: RePEc:hal:psewpa:hal-00814659
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  1. Clark, Andrew E. & Diener, Ed & Georgellis, Yannis & Lucas, Richard E., 2008. "Lags and Leads in Life Satisfaction: A Test of the Baseline Hypothesis," CEPREMAP Working Papers (Docweb) 0803, CEPREMAP.
  2. Richard Layard & Andrew E. Clark & Cornaglia Francesca & Powdthavee Nattavudh, 2014. "What Predicts a Successful Life? A Life-course Model of Well-being," PSE - Labex "OSE-Ouvrir la Science Economique" halshs-01109062, HAL.
  3. Blanchflower, David G. & Oswald, Andrew J., 2001. "Well-Being Over Time in Britain and the USA," The Warwick Economics Research Paper Series (TWERPS) 616, University of Warwick, Department of Economics.
  4. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2008. "Relative Income, Happiness, and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," Journal of Economic Literature, American Economic Association, vol. 46(1), pages 95-144, March.
  5. Cappellari, Lorenzo & Jenkins, Stephen P., 2002. "Modelling Low Income Transitions," IZA Discussion Papers 504, Institute for the Study of Labor (IZA).
  6. Markku Kaustia & Samuli Knüpfer, 2008. "Do Investors Overweight Personal Experience? Evidence from IPO Subscriptions," Journal of Finance, American Finance Association, vol. 63(6), pages 2679-2702, December.
  7. Ulrike Malmendier & Stefan Nagel, 2009. "Depression Babies: Do Macroeconomic Experiences Affect Risk-Taking?," NBER Working Papers 14813, National Bureau of Economic Research, Inc.
  8. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
  9. David Clark, 2009. "Adaptation, Poverty and Well-Being: Some Issues and Observations with Special Reference to the Capability Approach and Development Studies," Journal of Human Development and Capabilities, Taylor & Francis Journals, vol. 10(1), pages 21-42.
  10. Oswald, Andrew J. & Powdthavee, Nattavudh, 2006. "Does Happiness Adapt? A Longitudinal Study of Disability with Implications for Economists and Judges," IZA Discussion Papers 2208, Institute for the Study of Labor (IZA).
  11. Di Tella, Rafael & Haisken-De New, John & MacCulloch, Robert, 2010. "Happiness adaptation to income and to status in an individual panel," Journal of Economic Behavior & Organization, Elsevier, vol. 76(3), pages 834-852, December.
  12. Andreas Knabe & Steffen Rätzel, 2008. "Scarring or Scaring? The Psychological Impact of Past Unemployment and Future Unemployment Risk," CESifo Working Paper Series 2457, CESifo Group Munich.
  13. Tania Burchardt, 2005. "Are One Man’s Rags Another Man’s Riches? Identifying Adaptive Expectations using Panel Data," Social Indicators Research, Springer, vol. 74(1), pages 57-102, October.
  14. repec:oup:qjecon:v:119:y:2004:i:4:p:1249-1299 is not listed on IDEAS
  15. Easterlin, Richard A., 1995. "Will raising the incomes of all increase the happiness of all?," Journal of Economic Behavior & Organization, Elsevier, vol. 27(1), pages 35-47, June.
  16. Ruhm, Christopher J, 1991. "Are Workers Permanently Scarred by Job Displacements?," American Economic Review, American Economic Association, vol. 81(1), pages 319-24, March.
  17. Luc Christiaensen & Anthony Shorrocks, 2012. "Measuring poverty over time," Journal of Economic Inequality, Springer, vol. 10(2), pages 137-143, June.
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