Is Business Cycle Volatility Costly? Evidence from Surveys of Subjective Well-Being

Justin Wolfers

Research Papers from Stanford University, Graduate School of Business

Abstract: This paper analyzes the effects of business cycle volatility on measures of subjective well-being, including self-reported happiness and life satisfaction. I find robust evidence that high inflation and, to a greater extent, unemployment lower perceived well-being. Greater macroeconomic volatility also undermines well-being. These effects are moderate but important: eliminating unemployment volatility would raise well-being by an amount roughly equal to that from lowering the average level of unemployment by a quarter of a percentage point. The effects of inflation volatility on well-being are less easy to detect and are likely smaller.

Date: 2003-01
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Journal Article: Is Business Cycle Volatility Costly? Evidence from Surveys of Subjective Well‐Being (2003)
Working Paper: Is Business Cycle Volatility Costly? Evidence from Surveys of Subjective Wellbeing (2003)
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