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Adaptation to Poverty in Long-Run Panel Data

Author Info

Listed author(s):
  • Clark, Andrew E.

    ()

    (Paris School of Economics)

  • D'Ambrosio, Conchita

    ()

    (University of Luxembourg)

  • Ghislandi, Simone

    ()

    (Bocconi University)

Abstract

We consider the link between poverty and subjective well-being, and focus in particular on potential adaptation to poverty. We use panel data on almost 54,000 individuals living in Germany from 1985 to 2012 to show first that life satisfaction falls with both the incidence and intensity of contemporaneous poverty. We then reveal that there is little evidence of adaptation within a poverty spell: poverty starts bad and stays bad in terms of subjective well-being. We cannot identify any cause of poverty entry which explains the overall lack of poverty adaptation.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 8656.

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Length: 27 pages
Date of creation: Nov 2014
Publication status: published in: Review of Economics and Statistics, 2016, 98 (3), 591–600
Handle: RePEc:iza:izadps:dp8656
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Keywords: SOEP; adaptation; subjective well-being; poverty; income;

Other versions of this item:

Find related papers by JEL classification:
  • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
  • D60 - Microeconomics - - Welfare Economics - - - General

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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  1. Andrew E. Clark & Yannis Georgellis, 2013. "Back to Baseline in Britain: Adaptation in the British Household Panel Survey," Economica, London School of Economics and Political Science, vol. 80(319), pages 496-512, 07.
  2. Blanchflower, David G. & Oswald, Andrew J., 2004. "Well-being over time in Britain and the USA," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1359-1386, July.
  3. 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.
  4. 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.
  5. Andrew E. Clark & Ed Diener & Yannis Georgellis & Richard E. Lucas, 2008. "Lags And Leads in Life Satisfaction: a Test of the Baseline Hypothesis," Economic Journal, Royal Economic Society, vol. 118(529), pages 222-243, 06.
  6. Claudia Senik, 2005. "Income distribution and well-being: what can we learn from subjective data?," Journal of Economic Surveys, Wiley Blackwell, vol. 19(1), pages 43-63, 02.
  7. Oswald, Andrew J. & Powdthavee, Nattavudh, 2008. "Does happiness adapt? A longitudinal study of disability with implications for economists and judges," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1061-1077, June.
  8. Clemens Hetschko & Andreas Knabe & Ronnie Schöb, 2014. "Changing Identity: Retiring From Unemployment," Economic Journal, Royal Economic Society, vol. 124(575), pages 149-166, 03.
  9. Fleurbaey, Marc & Blanchet, Didier, 2013. "Beyond GDP: Measuring Welfare and Assessing Sustainability," OUP Catalogue, Oxford University Press, number 9780199767199.
  10. 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.
  11. Clark, Andrew E., 1999. "Are wages habit-forming? evidence from micro data," Journal of Economic Behavior & Organization, Elsevier, vol. 39(2), pages 179-200, June.
  12. Ed Diener & Robert Biswas-Diener, 2002. "Will Money Increase Subjective Well-Being?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 57(2), pages 119-169, February.
  13. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
  14. 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.
  15. Rafael Di Tella & Robert MacCulloch, 2006. "Some Uses of Happiness Data in Economics," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 25-46, Winter.
  16. Sen, Amartya K, 1976. "Poverty: An Ordinal Approach to Measurement," Econometrica, Econometric Society, vol. 44(2), pages 219-231, March.
  17. 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.
  18. Spinnewyn, Frans, 1981. "Rational habit formation," European Economic Review, Elsevier, vol. 15(1), pages 91-109.
  19. Gert G. Wagner & Joachim R. Frick & Jürgen Schupp, 2007. "The German Socio-Economic Panel Study (SOEP) – Scope, Evolution and Enhancements," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 127(1), pages 139-169.
  20. Pollak, Robert A, 1970. "Habit Formation and Dynamic Demand Functions," Journal of Political Economy, University of Chicago Press, vol. 78(4), pages 745-763, Part I Ju.
Full references (including those not matched with items on IDEAS)

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Adaptation to Poverty in Long-Run Panel Data By: Clark, Andrew E. ; D’Ambrosio, Conchita ; Ghislandi, Simone
    by maximorossi in NEP-LTV blog on 2015-07-30 17:24:38
  2. “Poverty starts bad and stays bad”
    by Robin in Cherokee Gothic on 2014-02-06 14:00:00
  3. Policy, & the aspirations gap
    by chris dillow in Stumbling and Mumbling on 2014-02-12 14:00:03
  4. Adaptation to Poverty in Long-Run Panel Data
    by maximorossi in NEP-LTV blog on 2014-12-30 12:16:51
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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Cited by:

  1. Andrew E. Clark, 2015. "Adaptation and the Easterlin Paradox," PSE - Labex "OSE-Ouvrir la Science Economique" halshs-01112725, HAL.
  2. repec:bof:bofitp:urn:nbn:fi:bof-201508181355 is not listed on IDEAS
  3. AYLLON Sara & FUSCO Alessio, 2016. "Are income poverty and perceptions of financial difficulties dynamically interrelated?," LISER Working Paper Series 2016-05, LISER.
  4. 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.
  5. Heinz Welsch & Philipp Biermann, 2016. "Poverty Is a Public Bad: Panel Evidence from Subjective Well-Being Data," SOEPpapers on Multidisciplinary Panel Data Research 885, DIW Berlin, The German Socio-Economic Panel (SOEP).
  6. Tim Reeskens & Leen Vandecasteele, 2017. "Economic Hardship and Well-Being: Examining the Relative Role of Individual Resources and Welfare State Effort in Resilience Against Economic Hardship," Journal of Happiness Studies, Springer, vol. 18(1), pages 41-62, February.
  7. Haining Wang & Zhiming Cheng & Russell Smyth, 2015. "Does Consuming More Make You Happier? Evidence from Chinese Panel Data," Monash Economics Working Papers 29-15, Monash University, Department of Economics.

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