Deconstructing the Hedonic Treadmill: Is Happiness Autoregressive?

Perez Truglia, Ricardo Nicolas and Bottan, Nicolas Luis (2008): Deconstructing the Hedonic Treadmill: Is Happiness Autoregressive?

Abstract

Affective habituation is well-documented in social sciences: people seem to adapt to many life events, ranging from lottery windfalls to terminal illnesses. We propose a subtle but critical difference: current happiness may depend directly on past happiness. We test our hypothesis running dynamic happiness regressions using panel data from the German Socio-Economic Panel Study, the British Household Panel Survey and the Swiss Household Panel. Contrary to the widespread prior among economists and non-economists, the coefficient on lagged happiness is positive and statistically significant. We discuss some explanations for the puzzle. Our favorite is that reported happiness is time-inconsistent, even within individuals. We test this conjecture by using a 52-days study. As expected, the coefficient on lagged happiness is negative and statistically significant. We find that changes in hedonic states bounce back 30% in only 5 days.

• Item Type: MPRA Paper
• Language: English
• Keywords: happiness, autoregressive, adaptation, dynamic panel
• Subjects: I - Health, Education, and Welfare > I3 - Welfare and Poverty > I31 - General Welfare; C - Mathematical and Quantitative Methods > C2 - Single Equation Models; Single Variables > C23 - Models with Panel Data; Longitudinal Data; Spatial Time Series; I - Health, Education, and Welfare > I0 - General > I00 - General

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