How Has the Crisis of 2008–09 Affected Subjective Well‐Being? Evidence from 25 OECD Countries

21 Pages Posted: 13 Jan 2016

See all articles by Heinz Welsch

Heinz Welsch

University of Oldenburg; ZenTra - Center for Transnational Studies

Jan Kühling

University of Oldenburg; ZenTra - Center for Transnational Studies

Date Written: January 2016

Abstract

This paper uses life satisfaction data of almost 140,000 individuals in 25 OECD countries to study how changes in the rates of GDP growth, unemployment, and inflation during the macroeconomic crisis of 2008–09 have affected subjective well‐being. The relative contributions of the three macroeconomic variables to individuals’ life satisfaction are used to assess how each country performed on balance during the crisis. This approach follows a recent trend of using subjective well‐being data for monitoring economic performance and for policy appraisal. We find that in the countries most strongly affected by the crisis, the effects on an average citizen's well‐being may be of a similar magnitude as the effects of the most serious personal life events. The main driver of these effects is the drop in GDP, whose impact is aggravated by the increase of unemployment. Though the inflation rate went down in several of the countries, the effect was too weak to significantly reduce the negative effect of the changes in GDP and unemployment. The results show that GDP fluctuations are important drivers of subjective well‐being.

Keywords: life satisfaction, macroeconomic crisis, subjective well‐being

JEL Classification: E32, E61, I31

Suggested Citation

Welsch, Heinz and Kühling, Jan, How Has the Crisis of 2008–09 Affected Subjective Well‐Being? Evidence from 25 OECD Countries (January 2016). Bulletin of Economic Research, Vol. 68, Issue 1, pp. 34-54, 2016, Available at SSRN: https://ssrn.com/abstract=2714634 or http://dx.doi.org/10.1111/boer.12042

Heinz Welsch (Contact Author)

University of Oldenburg ( email )

Ammerländer Heerstraße 114-118
Oldenburg, D-26111
Germany

ZenTra - Center for Transnational Studies ( email )

Ammerländer Heerstraße 138
Oldenburg, 26131
Germany

Jan Kühling

University of Oldenburg

Ammerländer Heerstraße 114-118
Oldenburg, D-26111
Germany

ZenTra - Center for Transnational Studies ( email )

Ammerländer Heerstraße 138
Oldenburg, 26131
Germany

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