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A test for the convexity of human well-being over the life cycle: longitudinal evidence from a 20-year panel

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  • van Landeghem, B.G.M.

    (Research Centre for Educ and Labour Mark)

Abstract

A huge cross-section literature, written by economists and others, argues that human well-being is U-shaped through the life cycle. In many cases this U-shape is robust (with a well-known exception the pattern evident in some U.S. data sets if few independent variables are included). However, a lively debate is currently ongoing about its true shape. This paper discusses the identification problem of age, time, and cohort effects. It suggests a simple way to interpret estimates of age variables in a first-difference framework. Building on McKenzie's (2006) methodology, the paper shows that no extra assumptions are needed in order to identify the second derivative of well-being to age, i.e. to estimate the changes in the actual age and well-being relationship. An empirical application, using a large German data set, finds that human well-being is convex in age until after midlife, which is approximately consistent with a U-shaped pattern through life, and not with the concave relationship sometimes found in U.S. studies.
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  • van Landeghem, B.G.M., 2011. "A test for the convexity of human well-being over the life cycle: longitudinal evidence from a 20-year panel," Research Memorandum 043, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    • Handle: RePEc:unm:umamet:2011043
    DOI: 10.26481/umamet.2011043
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    More about this item

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General

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