TY  - RPRT
        AU  - Bayer, Christian
AU  - Juessen, Falko
        TI  - Happiness and the Persistence of Income Shocks
        PY  - 2012/Jul/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 6771
        UR  - https://www.iza.org/index.php/publications/dp6771
        AB  - We reassess the empirical effect of income and employment on self-reported well-being. Our analysis makes use of a novel two-step estimation procedure that allows applying instrumental variable regressions with ordinal observable data. As suggested by the theory of incomplete markets, we differentiate between the effects of persistent and transitory income shocks. In line with this theory, we find that persistent shocks have a significant impact on happiness while transitory shocks do not. This has consequences also for inference about the happiness effect of employment. We find that employment per se is rather associated with a decline in happiness.
        KW  - income persistence
KW  - happiness
KW  - incomplete markets
        ER  -