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Does Happiness Adapt? A Longitudinal Study of Disability with Implications for Economists and Judges

  • Oswald, Andrew J.

    ()

    (University of Warwick)

  • Powdthavee, Nattavudh

    ()

    (London School of Economics)

Economics ignores the possibility of hedonic adaptation (the idea that people bounce back from utility shocks). This paper argues that economists are wrong to do so. It provides longitudinal evidence that individuals who become disabled go on to exhibit recovery in mental wellbeing. Adaptation to severe disability, however, is shown to be incomplete. The paper suggests ways to calculate the level of compensatory damages for the pain and suffering from disablement. Courts all over the world currently use ad hoc methods.

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File URL: http://ftp.iza.org/dp2208.pdf
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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2208.

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Length: 40 pages
Date of creation: Jul 2006
Date of revision:
Publication status: published in: Journal of Public Economics, 2008, 92 (5-6), 1061-1077
Handle: RePEc:iza:izadps:dp2208
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  22. Ferrer-i-Carbonell, Ada, 2005. "Income and well-being: an empirical analysis of the comparison income effect," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 997-1019, June.
  23. Easterlin, Richard A., 2005. "A puzzle for adaptive theory," Journal of Economic Behavior & Organization, Elsevier, vol. 56(4), pages 513-521, April.
  24. DiTella, Rafael & MacCulloch, Robert & Oswald, Andrew J., 2001. "Preferences over inflation and unemployment: Evidence from surveys of happiness," ZEI Working Papers B 03-2001, ZEI - Center for European Integration Studies, University of Bonn.
  25. Jonathan Gardner & Andrew J. Oswald, 2006. "Do divorcing couples become happier by breaking up?," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 169(2), pages 319-336.
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  28. Groot, Wim, 2000. "Adaptation and scale of reference bias in self-assessments of quality of life," Journal of Health Economics, Elsevier, vol. 19(3), pages 403-420, May.
  29. Oswald, Andrew J., 2005. "On the Common Claim that Happiness Equations Demonstrate Diminishing Marginal Utility of Income," IZA Discussion Papers 1781, Institute for the Study of Labor (IZA).
  30. Wim Groot & Henriëtte Maassen van den Brink, 2000. "Life-Satisfaction and Preference Drift," Social Indicators Research, Springer, vol. 50(3), pages 315-328, June.
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