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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 and Michael Shields
Authors registered in the RePEc Author Service: John P. de New

Canadian Journal of Economics, 2009, vol. 42, issue 4, 1326-1346

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.

JEL-codes: C23 C25 I31 Z1 (search for similar items in EconPapers)
Date: 2009
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