Abstract
Abstract This paper offers methodological comments on a recent (November 2014) Economic Journal article. The comments consider its use of a dynamic model – the inclusion of a lagged dependent variable – and its approach to estimation. By way of critique, the authors highlight general issues regarding dynamic panel analysis that are still less fully appreciated in the economics of happiness literature than elsewhere in economics and other quantitative social sciences. This discussion of methodological issues arising from dynamic estimation may be of practical assistance to researchers new to the field and/or to dynamic modelling.
Highlights
Two papers published in the Economic Journal in 2014 have attempted to investigate the influence of the past on adult well-being (Frijters et al 2014; Layard et al 2014)
To do so they have used two sets of British Cohort data: the National Child Development Survey (NCDS), which tracks individuals born in a particular week in 1958; and the British Cohort Survey (BCS), which follows individuals born in a particular week in 1970
Our purpose is not to replicate Frijters et al (2014) but rather, by way of critique, to highlight issues regarding dynamic panel analysis that are still less fully appreciated in the economics of happiness literature than elsewhere in economics and other quantitative social sciences
Summary
Two papers published in the Economic Journal in 2014 have attempted to investigate the influence of the past on adult well-being (Frijters et al 2014; Layard et al 2014). This is problematic because the OLS point estimates for the lags of the life satisfaction variables are biased upwards (Bond, 2002), substantially overestimating the impact of past life satisfaction on current life satisfaction.
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