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A Test for the Convexity of Human Well-Being over the Life Cycle: Longitudinal Evidence from a 20-Year Panel

  • Landeghem Bert van

    (METEOR)

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    A huge cross-section literature, written by economists and others, argues that human well-being isU-shaped through the life cycle. In many cases this U-shape is robust (with as a well-knownexception 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 identi cation problem of age, time, and cohort e ects. It suggests a simple way to interpretestimates of age variables in a rst-di erence framework. Building on McKenzie''s (2006) methodology,the paper shows that no extra assumptions are needed in order to identify the second derivative ofwell-being to age, i.e. to estimate the changes in changes in the actual age and well-beingrelationship. An empirical application, using a large German data set, nds that human well-beingis convex in age until after midlife, which is approximately consistent with a U-shaped patternthrough life, and not with the concave relationship sometimes found in U.S. studies.

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    Paper provided by Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR) in its series Research Memorandum with number 043.

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    Date of creation: 2011
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    Handle: RePEc:unm:umamet:2011043
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