The relationship between age and subjective well-being: Estimating within and between effects simultaneously

Abstract

In this paper, we employ a correlated random effects econometric framework to simultaneously estimate the within and between effects of age on subjective well-being based on longitudinal survey data from the German Socio-Economic Panel (SOEP). The proposed approach helps to explain differing findings on the relationship between age and subjective well-being reported in a series of studies based on cross-sectional and/or longitudinal panel data. We find empirical support for a wave-like pattern of subjective well-being over the life course. In contrast to the existing literature, our results point to significantly different life cycle patterns for the within- and between-person results. While the between-person results show robust turning points of age around the mid-40s and 90s, the within-person findings indicate that subjective well-being is rather stable between age 16 and 23 and then approaches a local maximum at age 75. We show that the type of variation employed in the empirical analysis (e.g., cross-sectional vs. longitudinal panel) of the age-well-being association has a non-negligible impact on the obtained results and the inferences drawn. Moreover, we do not find support of a U-shape association between subjective well-being and age. This finding holds even if we restrict the sample to those survey respondents aged 18–65 years, indicating that the age-well-being relationship is more complex than a U-shape would predict. A series of additional robustness tests corroborate our main findings.