How well do individuals predict their future life satisfaction? Evidence from panel data following a nationwide exogenous shock

Paul Frijters, Harry Greenwell, John P Haisken-Denew, Michael A Shields

Research output: Contribution to journalArticleResearchpeer-review

10 Citations (Scopus)

Abstract

Using German panel data, we investigate how well individuals predict their own future life satisfaction. The context is the decade following the 1990 reunification of Germany, which provided a large shock to the future prospects of the inhabitants of the former East Germany. We find that the majority of East Germans significantly overestimated the satisfaction gains from reunification in the years immediately after transition, but by 1994 had converged on correct aggregate expectations. Some evidence of micro-heterogeneity in the prediction errors is found by age and education. For West Germans, we find some initial over-optimism, although less than for East Germans.
Original languageEnglish
Pages (from-to)1326 - 1346
Number of pages21
JournalCanadian Journal of Economics
Volume42
Issue number4
DOIs
Publication statusPublished - 2009
Externally publishedYes

Cite this