Perception and retrospection: the dynamic consistency of responses to survey questions on wellbeing

Publication type

ISER Working Paper Series

Series Number

2010-07

Series

ISER Working Paper Series

Author

Publication date

March 15, 2010

Abstract:

Implementation of broad approaches to welfare analysis usually entails the use of 'subjective' welfare indicators. We analyse BHPS data on financial wellbeing to determine whether reported current and retrospective perceptions are consistent with each other and with the existence of a common underlying wellbeing concept. We allow for adjustment of perceptions in a vector ARMA model for panel data, with dependent variables observed ordinally and find that current perceptions exhibit slow adjustment to changing circumstances and retrospective assessments of past wellbeing are heavily contaminated by current circumstances, causing significant bias in measures of the level and change in welfare.

Subjects

Notes

working paper

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