Life Satisfaction Dynamics with Quarterly Life Event Data

22 Pages Posted: 28 Feb 2011

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

Date Written: February 17, 2011

Abstract

Using life satisfaction responses from Australian panel data we examine the questions 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 a close relative, and being the 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 anticipate major events to a large extent, and that they fully adapt to many events within 12 months. The estimates can be used to calculate monetary values needed to compensate individuals for life events. Using a new valuation methodology that incorporates these dynamic factors produces considerably smaller compensation valuations than those calculated using the standard approach.

Keywords: Happiness, anticipation, adaptation, compensation

JEL Classification: D1, I31, K0

Suggested Citation

Frijters, Paul and Johnston, David W. and Shields, Michael A., Life Satisfaction Dynamics with Quarterly Life Event Data (February 17, 2011). Scandinavian Journal of Economics, Vol. 113, No. 1, pp. 190-211, 2011. Available at SSRN: https://ssrn.com/abstract=1772432 or http://dx.doi.org/10.1111/j.1467-9442.2010.01638.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

Register to save articles to
your library

Register

Paper statistics

Downloads
1
Abstract Views
346
PlumX Metrics