November 2007

IZA DP No. 3170: Born To Be Mild? Cohort Effects Don’t (Fully) Explain Why Well-Being Is U-Shaped in Age

published in: Mariano Rojas (ed.), The Economics of Happiness: How the Easterlin Paradox Transformed our Understanding of Well-being and Progress, New York: Springer, 2019

The statistical analysis of cross-section data very often reveals a U-shaped relationship between subjective well-being and age. This paper uses fourteen waves of British panel data to distinguish between two potential explanations of this shape: a pure life-cycle or aging effect, and a fixed cohort effect depending on year of birth. Panel analysis controlling for fixed effects continues to produce a U-shaped relationship between well-being and age, although this U-shape is flatter for life satisfaction than for the GHQ measure of mental well-being. The pattern of the estimated cohort effects also differs between the two well-being measures and, to an extent, by demographic group. In particular, those born earlier report more positive GHQ scores, controlling for their current age; this phenomenon is especially prevalent for women.