Happiness Dynamics with Quarterly Life Event Data

25 Pages Posted: 4 Aug 2008

See all articles by Paul Frijters

Paul Frijters

Queensland University of Technology - School of Economics and Finance

David W. Johnston

Monash University

Michael A. Shields

University of Melbourne - Department of Economics; IZA Institute of Labor Economics

Abstract

This paper addresses the question of when and to what extent individuals are affected by major positive and negative life events, including changes in financial situation, marital status, death of child or spouse and being a victim of crime. The key advantage of our data is that we are able to identify these events on a quarterly basis rather than on the yearly basis used by previous studies. We find evidence that life events are not randomly distributed, that individuals to a large extent anticipate major events and that they quickly adapt. These effects have important implications for the calculation of monetary values needed to compensate individuals for life events such as crime or death of spouse. We find that our new valuation methodology that incorporates these dynamic factors produces considerably smaller compensation valuations than those calculated using the standard approach.

Keywords: life satisfaction, life events, adaptation, compensation

JEL Classification: I0

Suggested Citation

Frijters, Paul and Johnston, David W. and Shields, Michael A., Happiness Dynamics with Quarterly Life Event Data. IZA Discussion Paper No. 3604. Available at SSRN: https://ssrn.com/abstract=1184013 or http://dx.doi.org/10.1111/j.0042-7092.2007.00700.x

Paul Frijters (Contact Author)

Queensland University of Technology - School of Economics and Finance ( email )

GPO Box 2434
2 George Street
Brisbane, Queensland 4001
Australia
(07) 3864 9364 (Phone)
(07) 3864 1500 (Fax)

HOME PAGE: http://www.bus.qut.edu.au/paulfrijters/index.jsp

Michael A. Shields

University of Melbourne - Department of Economics ( email )

Victoria 3010, 3010
Australia
+61 3 8344 4656 (Phone)
+61 3 8344 6899 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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