'De Gustibus Errari (pot)Est': Utility Misprediction, Preferences for Well-Being and Life Satisfaction

Posted: 28 Aug 2014 Last revised: 10 Jan 2017

See all articles by Leonardo Becchetti

Leonardo Becchetti

University of Rome Tor Vergata - Faculty of Economics

Pierluigi Conzo

University of Turin - Department of Economics and Statistics; Collegio Carlo Alberto

Date Written: July 18, 2014

Abstract

The life satisfaction literature generally focuses on how life events affect subjective well-being. Through a contingent valuation survey we test whether well-being preferences have significant impact on life satisfaction. A sample of respondents is asked to simulate a policymaker decision consisting in allocating scarce financial resources among 11 well-being domains. Consistently with the utility misprediction hypothesis, we find that the willingness to invest more in the economic well-being domain is negatively correlated with life satisfaction. Our findings are shown to be robust when we account for unobservables related to economic fragility and non-random sample selection. Reverse causality and omitted variable bias are controlled for with instrumental variables and a sensitivity analysis on departures from exogeneity assumptions. Subsample estimates document that the less educated are more affected by the problem.

Keywords: life satisfaction, well-being preferences, utility misprediction, subjective well-being

JEL Classification: A13, D64, H50, I31

Suggested Citation

Becchetti, Leonardo and Conzo, Pierluigi, 'De Gustibus Errari (pot)Est': Utility Misprediction, Preferences for Well-Being and Life Satisfaction (July 18, 2014). CEIS Working Paper No. 327, Available at SSRN: https://ssrn.com/abstract=2477791 or http://dx.doi.org/10.2139/ssrn.2477791

Leonardo Becchetti (Contact Author)

University of Rome Tor Vergata - Faculty of Economics ( email )

Via Columbia, 2
I-00133 Rome
Italy

Pierluigi Conzo

University of Turin - Department of Economics and Statistics ( email )

Campus Luigi Einaudi
Lungo Dora Siena 100 A
Torino, Torino 10153
Italy
011/6703892 (Phone)
011/6703895 (Fax)

HOME PAGE: http://www.pieroconzo.altervista.org/wordpress/

Collegio Carlo Alberto ( email )

Piazza Arbarello, 8
Torino, 10122
Italy

HOME PAGE: http://www.carloalberto.org/people/faculty/affiliates/pierluigi-conzo/

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