Can The Large Swings in Russian Life Satisfaction be Explained by Ups and Downs in Real Incomes?

Frijters, Paul, Geishecker, Ingo, Haisken-DeNew, John P., & Shields, Michael A. (2006) Can The Large Swings in Russian Life Satisfaction be Explained by Ups and Downs in Real Incomes? Scandinavian Journal of Economics, 108(3), pp. 433-458.

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Russians reported large changes in their life satisfaction over the post-transition years. In this paper, we explore the factors that drove these changes using panel data from the Russian Longitudinal Monitoring Survey over the period 1995 to 2001. Our particular focus is the role of real income changes, and the extent of income changes observed over this period, clearly suggests that they were exogenously driven. Our empirical framework attempts to combine insights from both psychology and economics, and we apply a recently developed ordinal effect estimator that allows for the ordinal nature of our life satisfaction measure and controls for individual fixed effects. We then apply a causal decomposition technique that allows for bias arising from panel attrition when establishing aggregate trends in life satisfaction. The main finding is that changes in real household incomes explained 10% of the total change in reported life satisfaction between 1996 and 2000, but up to 30% of some year-on-year changes. Finally, we have been able to confirm the results of previous studies that life satisfaction rises significantly in response to moving from unemployment to employment, and falls in response to wage arrears, poor health and marital dissolution.

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ID Code: 3627
Item Type: Journal Article
Refereed: Yes
Keywords: Life satisfaction, Income, Russia, Fixed, Effects, Causal Decomposition, Panel Attrition
DOI: 10.1111/j.1467-9442.2006.00459.x
ISSN: 0347-0520
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Copyright Owner: Copyright 2006 Blackwell Publishing
Copyright Statement: The definitive version is available at
Deposited On: 14 Jun 2006 00:00
Last Modified: 24 Apr 2015 02:05

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