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The asymmetric effect of expectations on subjective well-being

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  • Marta Barazzetta

    (Université du Luxembourg)

Abstract

We empirically explore the relationship between expectations and subjective well-being. Theoretical models predict that expectations can influence experienced utility in two ways: (i) directly as anticipatory emotions in the form of savouring or dread; (ii) indirectly as internal reference levels in the form of deviations between expectations and actual achievements. We use twelve waves of the British Household Panel Survey to empirically investigate the double effect of expectations on experienced utility, as proxied by subjective well-being. We find a strong asymmetry in the way expectations affect subjective well-being. Negative deviations from expectations have a strong negative effect on subjective well-being, while the effect of positive deviations is weaker and sometimes insignificant. Expecting a worsening has a larger impact on subjective well-being than expecting an improvement.

Suggested Citation

  • Marta Barazzetta, 2015. "The asymmetric effect of expectations on subjective well-being," Working Papers 374, ECINEQ, Society for the Study of Economic Inequality.
    • Handle: RePEc:inq:inqwps:ecineq2015-374
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    File URL: http://www.ecineq.org/milano/WP/ECINEQ2015-374.pdf
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    More about this item

    Keywords

    Subjective well-being; expectations; disappointment aversion; panel data; BHPS.;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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