A simple statistical method for measuring how life events affect happiness.

Abstract

Life events-like illness, marriage, or unemployment-have important effects on people. But there is no accepted way to measure the different sizes of these events upon human happiness and psychological health. By using happiness regression equations, economists have recently developed a method. We estimate happiness regressions using large random samples of individuals. The relative coefficients of income and life events on happiness allow us to calculate a monetary 'compensating amount' for each kind of life event. The paper calculates the impact of different life events upon human well-being. Getting married, for instance, is calculated to bring each year the same amount of happiness, on average, as having an extra pound 70 000 of income per annum. The psychological costs of losing a job greatly exceed those from the pure drop in income. Health is hugely important to happiness. Widowhood brings a degree of unhappiness that would take, on average, an extra pound 170 000 per annum to offset. Well-being regressions also allow us to assess one of the oldest conjectures in social science-that well-being depends not just on absolute things but inherently on comparisons with other people. We find evidence for comparison effects. We believe that the new statistical method has many applications. In principle, it can be used to value any kind of event in life.