Lags and Leads in Life Satisfaction: A Test of the Baseline Hypothesis

TLDR

The study seeks evidence of habituation to life and labour market events. It uses twenty waves of German panel data to test whether individuals return to a baseline level of well‑being after such events. The strongest life satisfaction effect occurs at the event, but significant lag and lead effects are observed; complete adaptation is found for marriage, divorce, widowhood, birth of child, and layoff, while adaptation to unemployment is limited for men, and overall anticipation and adaptation patterns are similar across sexes.

Abstract

We look for evidence of habituation in twenty waves of German panel data: do individuals tend to return to some baseline level of well‐being after life and labour market events? Although the strongest life satisfaction effect is often at the time of the event, we find significant lag and lead effects. We cannot reject the hypothesis of complete adaptation to marriage, divorce, widowhood, birth of child and layoff. However, there is little evidence of adaptation to unemployment for men. Men are somewhat more affected by labour market events (unemployment and layoffs) than are women but in general the patterns of anticipation and adaptation are remarkably similar by sex.