We examine the roles of macro-level adaptation - including social comparison effects becoming more important over time - and macroeconomic loss aversion in the time-series relationship between national income and subjective well-being. Models allowing for these phenomena are applied to crosscountry panel data. We find evidence for macroeconomic loss aversion that becomes more important over time: the effects of economic growth become small and statistically insignificant in the long run, whereas the effects of contractions are large and long-lasting. The results are consistent with the Easterlin paradox and point to it being explained by macro-level adaptation to economic growth. Our results highlight the importance of allowing for both dynamics to distinguish longrun from short-run effects and asymmetries to recognize the important effects of contractions. Failing to do the former leads to a misleading impression of the longrun relationship between economic growth and well-being.
|Julkaisu||B.E. Journal of Economic Analysis and Policy|
|DOI - pysyväislinkit|
|Tila||E-pub ahead of print - 2021|
- Jufo-taso 1
!!ASJC Scopus subject areas
- Economics and Econometrics
- Economics, Econometrics and Finance (miscellaneous)