Understanding fixed effects in human well-being

Citation

Boyce CJ (2010) Understanding fixed effects in human well-being. Journal of Economic Psychology, 31 (1), pp. 1-16. https://doi.org/10.1016/j.joep.2009.08.009

Abstract
In studies of subjective well-being, economists and other researchers typically use a fixed or random effect estimation to control for unobservable heterogeneity across individuals. Such individual heterogeneity, although substantially reducing the estimated effect of many characteristics, is little understood. This paper shows that personality measures can account for 20% of this heterogeneity and a further 13% can be accounted for by other observable between-person information. This paper then demonstrates that the use of personality measures, in a new technique developed by [Plumper, T., Troeger, V.E. (2007). Efficient estimation of time-invariant and rarely changing variables in finite sample panel analyses with unit fixed effects, Political Analysis, 15(2), 124-139.], can help researchers obtain improved estimates for important characteristics such as marital status, disability and income. The paper argues that this has important practical implications.

Keywords
Life satisfaction; Individual differences; Personality; Fixed effect vector decomposition; GSOEP ; Quality of life

Journal
Journal of Economic Psychology: Volume 31, Issue 1

• Fixed_Effects_Human_Well-Being_Boyce2010_JOEP.pdf