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Subjective Well-Being During the 2008 Economic Crisis: Identification of Mediating and Moderating Factors

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Abstract

We examine the effects of the 2008 economic crisis on the reported subjective well-being (SWB) of nationally representative samples in 36 mainly European countries between 2002 and 2013. We study how SWB fluctuates along the business cycle, and how it is mediated by individual and country-level socioeconomic factors. Our key finding is that the economic crisis had a negative and S-shaped effect on SWB, implying diminishing marginal sensitivity at higher income losses and gains. During the economic downturn, roughly half of individual-level and macro-level determinants exhibit notable changes in significance and/or magnitude of the effect on SWB. This is taken as an indication of psychological adaptation and shifting reference frames. Five factors display an augmented effect on happiness and life satisfaction during the crisis (below-average income, the Gini index, attitude towards income equality, religiosity, and conscientiousness), while two determinants exhibit attenuated impact on the SWB measures (relationship status and unemployment rate).

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Notes

  1. Commuting has been found to have a strong negative impact on both measures of affect (Kahneman et al. 2004) and life evaluations (Frey and Stutzer 2008).

  2. Some of the interviews in Round 6 were conducted in 2013. In the analysis, we use the actual year of the interview and the corresponding macro-level variables.

  3. To gain more nuanced evidence, we have successively added the remaining controls to the specification with a standard set of sociodemographic individual controls and observed the corresponding changes in the recession dummy coefficient. When individual psychological traits and days of the week are added, the coefficient drops from −0.131*** (column 2 in Table 1) to −0.091***. Adding GDP per capita and unemployment rate reduces the coefficient further to −0.030**. The remaining macroeconomic variables bring it to 0.00398, the value reported in column 3 in Table 1. The fact that the recession dummy is strongly correlated with GDP per capita and the unemployment rate explains the abovementioned substantial drop in the regression coefficient.

  4. Multivariate local smoothing was performed by the mrunning Stata module by Royston and Cox (2005) for lowess smoothing with multiple predictors.

  5. Both specifications exclude recession dummy and most of the macro controls (except inflation, Gini coefficient and life expectancy) and include individual level controls, unemployment rate and country and year dummies.

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  1. Gregor Gonza

    Present address: National Bureau of Investigation, Štefanova 2, 1000, Ljubljana, Slovenia

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  1. Faculty of Social Sciences, University of Ljubljana, Kardeljeva ploščad 5, 1000, Ljubljana, Slovenia

    Gregor Gonza & Anže Burger

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Table 5 Summary statistics and sources of data.
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Gonza, G., Burger, A. Subjective Well-Being During the 2008 Economic Crisis: Identification of Mediating and Moderating Factors. J Happiness Stud 18, 1763–1797 (2017). https://doi.org/10.1007/s10902-016-9797-y

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