NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Is Business Cycle Volatility Costly? Evidence from Surveys of Subjective Wellbeing

Justin Wolfers

NBER Working Paper No. 9619
Issued in April 2003
NBER Program(s):   EFG   LS

This paper analyzes the effects of business cycle volatility on measures of subjective well-being, including self-reported happiness and life satisfaction. I find robust evidence that high inflation and, to a greater extent, unemployment lower perceived well-being. Greater macroeconomic volatility also undermines well-being. These effects are moderate but important: eliminating unemployment volatility would raise well-being by an amount roughly equal to that from lowering the average level of unemployment by a quarter of a percentage point. The effects of inflation volatility on well-being are less easy to detect and are likely smaller.

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Document Object Identifier (DOI): 10.3386/w9619

Published: Wolfers, Justin. "Is Business Cycle Volatility Costly? Evidence From Surveys Of Subjective Well-Being," International Finance, 2003, v6(1,Apr), 1-26.

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