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(Mis-)Predicted Subjective Well-Being Following Life Events

Author

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  • Odermatt, Reto

    () (University of Basel)

  • Stutzer, Alois

    () (University of Basel)

Abstract

The correct prediction of how alternative states of the world affect our lives is a cornerstone of economics. We study how accurate people are in predicting their future well-being when facing major life events. Based on individual panel data, we compare people's forecast of their life satisfaction in five years' time to their actual realisations later on. This is done after the individuals experience widowhood, marriage, unemployment or disability. We find systematic prediction errors that are at least partly driven by unforeseen adaptation.

Suggested Citation

  • Odermatt, Reto & Stutzer, Alois, 2015. "(Mis-)Predicted Subjective Well-Being Following Life Events," IZA Discussion Papers 9252, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp9252
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. (Mis-)Predicted Subjective Well-Being Following Life Events
      by maximorossi in NEP-LTV blog on 2015-09-09 17:26:29

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    Cited by:

    1. Kuhn, Andreas, 2015. "The Individual Perception of Wage Inequality: A Measurement Framework and Some Empirical Evidence," IZA Discussion Papers 9579, Institute for the Study of Labor (IZA).
    2. Akay, Alpaslan & Bargain, Olivier & Jara, Xavier, 2017. "'Fair' Welfare Comparisons with Heterogeneous Tastes: Subjective versus Revealed Preferences," IZA Discussion Papers 10908, Institute for the Study of Labor (IZA).
    3. Krekel, Christian & Zerrahn, Alexander, 2017. "Does the presence of wind turbines have negative externalities for people in their surroundings? Evidence from well-being data," Journal of Environmental Economics and Management, Elsevier, vol. 82(C), pages 221-238.
    4. Kelsey J. O'Connor & Carol Graham, 2018. "Longer, More Optimistic, Lives: Historic Optimism and Life Expectancy in the United States," Working Papers 2018-026, Human Capital and Economic Opportunity Working Group.
    5. Akay, Alpaslan & Bargain, Olivier & Jara, Xavier, 2017. "Back to Bentham, Should We? Large-Scale Comparison of Experienced versus Decision Utility," IZA Discussion Papers 10907, Institute for the Study of Labor (IZA).
    6. repec:spr:inrvec:v:65:y:2018:i:2:d:10.1007_s12232-017-0290-7 is not listed on IDEAS
    7. Odermatt, Reto & Powdthavee, Nattavudh & Stutzer, Alois, 2017. "Overoptimistic Entrepreneurs: Predicting Wellbeing Consequences of Self-Employment," IZA Discussion Papers 11098, Institute for the Study of Labor (IZA).
    8. Hielke Buddelmeyer & Daniel S. Hamermesh & Mark Wooden, 2015. "The Stress Cost of Children," Melbourne Institute Working Paper Series wp2015n01, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    9. Akay, Alpaslan & Bargain, Olivier B. & Jara, H. Xavier, 2017. "Back to Bentham, Should We? Large-Scale Comparison of Experienced versus Decision Utility," GLO Discussion Paper Series 52, Global Labor Organization (GLO).

    More about this item

    Keywords

    adaptation; life satisfaction; life events; projection-bias; subjective well-being; utility prediction; unemployment;

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D60 - Microeconomics - - Welfare Economics - - - General
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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