Economic Shocks and Subjective Well-Being: Evidence from a Quasi-Experiment

32 Pages Posted: 4 Mar 2013

See all articles by Jacob Gerner Hariri

Jacob Gerner Hariri

University of Copenhagen - Department of Political Science and Department of Economics

Christian Bjørnskov

Aarhus University - Department of Economics and Business; Research Institute of Industrial Economics (IFN); Center for Political Studies; Institute for Corruption Studies

Mogens K. Justesen

Copenhagen Business School

Multiple version iconThere are 2 versions of this paper

Date Written: March 2, 2013

Abstract

This paper examines how economic shocks affect individual well-being in developing countries. Using the case of a sudden and unanticipated currency devaluation in Botswana as a quasi-experiment, we examine how this monetary shock affects individuals’ evaluations of well-being. We do so by using micro-level survey data, which – incidentally – was collected in the days surrounding the devaluation. The chance occurrence of the devaluation during the time of the survey enables us to use pre-treatment respondents, surveyed before the devaluation, as approximate counterfactuals for post-treatment respondents, surveyed after the devaluation. Our estimates show that the devaluation had a large and significantly negative effect on individuals’ evaluations of subjective well-being. These results suggest that macroeconomic shocks, such as unanticipated currency devaluations, may have significant short-term costs in the form of reductions in people’s sense of well-being.

Keywords: subjective well-being, economic shocks, currency devaluation, quasi-experiment

JEL Classification: E50, H0, I31, O23

Suggested Citation

Hariri, Jacob and Bjørnskov, Christian and Justesen, Mogens K., Economic Shocks and Subjective Well-Being: Evidence from a Quasi-Experiment (March 2, 2013). Available at SSRN: https://ssrn.com/abstract=2228100 or http://dx.doi.org/10.2139/ssrn.2228100

Jacob Hariri

University of Copenhagen - Department of Political Science and Department of Economics ( email )

Solbjerg Plads 3
Copenhagen, DK-2100
Denmark

Christian Bjørnskov

Aarhus University - Department of Economics and Business ( email )

Fuglesangs Allé 4
Aarhus V, DK-8210
Denmark

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Center for Political Studies

Landgreven 3
Copenhagen K, DK-1301
Denmark

Institute for Corruption Studies

Stevenson Hall 425
Normal, IL 61790-4200
United States

Mogens K. Justesen (Contact Author)

Copenhagen Business School ( email )

Department of Business and Politics
Porcelænshaven 1
Frederiksberg C, DK - 2000
Denmark

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