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

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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 of Labor Economics (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
    2. The impact bias against Labour
      by chris in Stumbling and Mumbling on 2017-09-29 17:51:17

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    4. Clark, Andrew E. & Díaz Serrano, Lluís, 2020. "The Long-run Effects of Housing on Well-Being," Working Papers 2072/376033, Universitat Rovira i Virgili, Department of Economics.
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    10. Alpaslan Akay & Olivier Bargain & H. Xavier Jara, 2020. "‘Fair’ welfare comparisons with heterogeneous tastes: subjective versus revealed preferences," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 55(1), pages 51-84, June.
    11. Odermatt, Reto & Stutzer, Alois, 2020. "Does the Dream of Home Ownership Rest upon Biased Beliefs? A Test Based on Predicted and Realized Life Satisfaction," IZA Discussion Papers 13510, Institute of Labor Economics (IZA).
    12. Chadi, Adrian & de Pinto, Marco & Schultze, Gabriel, 2019. "Young, gifted and lazy? The role of ability and labor market prospects in student effort decisions," Economics of Education Review, Elsevier, vol. 72(C), pages 66-79.
    13. 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).
    14. Bartosz Wilczek, 2018. "Media use and life satisfaction: the moderating role of social events," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 65(2), pages 157-184, June.
    15. O'Connor, Kelsey J. & Graham, Carol, 2019. "Longer, more optimistic, lives: Historic optimism and life expectancy in the United States," Journal of Economic Behavior & Organization, Elsevier, vol. 168(C), pages 374-392.
    16. Odermatt, Reto & Powdthavee, Nattavudh & Stutzer, Alois, 2017. "Overoptimistic Entrepreneurs: Predicting Wellbeing Consequences of Self-Employment," IZA Discussion Papers 11098, Institute of Labor Economics (IZA).
    17. 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.
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    20. Akay, Alpaslan & Bargain, Olivier B. & Jara, Xavier, 2017. "‘Fair’ Welfare Comparisons with Heterogeneous Tastes: Subjective versus Revealed Preferences," Working Papers in Economics 707, University of Gothenburg, Department of Economics.
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    More about this item

    Keywords

    adaptation; life satisfaction; life events; projection-bias; subjective well-being; utility prediction; unemployment;
    All these keywords.

    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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