Fear of the Dark: Inflation Experiences and Subjective Well-being

Andrej Cupák and Mária Širaňová

Economics Letters, 2023, vol. 233, issue C

Abstract: In this paper, we estimate the impact of past inflation experiences (à la Malmendier and Wachter, 2023) on people's current level of utility as revealed by their subjective well-being. Combining detailed EU-level Household Finance and Consumption Survey microdata and lifetime experienced inflation, we provide novel evidence that individual households who have experienced higher historical inflation report significantly lower current life satisfaction scores, even after controlling for a large set of socio-economic characteristics and household wealth and income levels. However, for the old EU countries sample, individual households appear to derive higher subjective well-being from modest inflation up to around 2.6%.

Keywords: Behavioral finance; Household finance; Experience effects; Inflation; Subjective well-being; Life satisfaction (search for similar items in EconPapers)
JEL-codes: D83 D91 E31 G41 G50 I30 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:233:y:2023:i:c:s0165176523004603

DOI: 10.1016/j.econlet.2023.111434

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