28 Pages Posted: 11 Apr 2003
Date Written: April 2003
This paper analyzes the effects of business cycle volatility on measures of subjective well-being, including self-reported happiness and life satisfaction. I find robust evidence that high inflation and, to a greater extent, unemployment lower perceived well-being. Greater macroeconomic volatility also undermines well-being. These effects are moderate but important: eliminating unemployment volatility would raise well-being by an amount roughly equal to that from lowering the average level of unemployment by a quarter of a percentage point. The effects of inflation volatility on well-being are less easy to detect and are likely smaller.
Suggested Citation: Suggested Citation
Wolfers, Justin, Is Business Cycle Volatility Costly? Evidence from Surveys of Subjective Wellbeing (April 2003). NBER Working Paper No. w9619. Available at SSRN: https://ssrn.com/abstract=394727