Deconstructing the Hedonic Treadmill: Is Happiness Autoregressive?
37 Pages Posted: 3 Sep 2008 Last revised: 23 Apr 2011
Date Written: October 1, 2009
Affective habituation is well-documented in social sciences: people seem to adapt to many life events, ranging from lottery windfalls to terminal illnesses. A group of studies have tried to measure habituation by seeing how lagged values of life events affect present happiness. We propose an additional adaptation channel: current happiness may depend directly on past happiness, which amounts to assessing whether happiness is autoregressive. We run dynamic happiness regressions using individual-level panel data from the four large household panels. As in previous studies, the coefficients on lagged events (e.g., becoming unemployed, getting married) suggest habituation. However, all the econometric models suggest that the coefficient on lagged happiness is positive and significant. We discuss whether this may be evidence of happiness having an inertial force (besides the usual habituation channel).
Keywords: happiness, autoregressive, adaptation, dynamic panel
JEL Classification: D0, I31
Suggested Citation: Suggested Citation