Ryan D. Nunn
1775 Massachusetts Ave. NW
Institutional Affiliation: Brookings Institution
NBER Working Papers and Publications
|July 2015||Accounting for Adaptation in the Economics of Happiness|
with Miles Kimball, Dan Silverman: w21365
Reported happiness provides a potentially useful way to evaluate unpriced goods and events; but measures of subjective well-being (SWB) often revert to the mean after responding to events, and this hedonic adaptation creates challenges for interpretation. Previous work tends to estimate time-invariant effects of events on happiness. In the presence of hedonic adaptation, this restriction can lead to biases, especially when comparing events to which people adapt at different rates. Our paper provides a flexible, extensible econometric framework that accommodates adaptation and permits the comparison of happiness-relevant life events with dissimilar hedonic adaptation paths. We present a method that is robust to individual fixed effects, imprecisely-dated data, and permanent consequences. Th...