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

45 Pages Posted: 20 Apr 2016

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

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Date Written: March 10, 2015

Abstract

This article 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, the article examines how this monetary shock affects individuals' evaluations of well-being. This is done by using microlevel survey data, which?incidentally?were collected in the days surrounding the devaluation. The chance occurrence of the devaluation during the time of the survey enables us to use pretreatment respondents, surveyed before the devaluation, as approximate counterfactuals for post-treatment respondents, surveyed after the devaluation. 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: Economic Theory & Research, Debt Markets, Currencies and Exchange Rates, Fiscal & Monetary Policy, Emerging Markets

Suggested Citation

Hariri, Jacob and Bjørnskov, Christian and Justesen, Mogens K., Economic Shocks and Subjective Well-Being: Evidence from a Quasi-Experiment (March 10, 2015). World Bank Policy Research Working Paper No. 7209, Available at SSRN: https://ssrn.com/abstract=2576525

Jacob Hariri (Contact Author)

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

Copenhagen Business School ( email )

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

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