The Dynamics of Happiness: Evidence from Daily Panel Data

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The Dynamics of HappinessEvidence from Daily
Panel Data

• Miles Kimball, Fumio Ohtake and Yoshiro Tsutsui

RAs Yuki Kosaka and Noah Smith
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Two Meanings of Happiness

• The grand meaning
• the greatest good for an individual, as viewed by
  that individual.
• The narrow meaning
• feeling happy.

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The Big Question Connection Between These Two
Meanings?

• Why it matters
• The greatest good for an individual as viewed by
  that individual is closely related to welfare
  concepts in economics.
• Data on how happy people say they feel is
  abundant.

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The relationship between long-run happiness and
economic welfare concepts is controversial.

• Choices that do not maximize happiness
• e.g., commuting further
• bigger house and yard
• more pay
• aggravating commute that dominates the effect of
  this choice on happiness
• Easterlin Paradox strong upward trend in income,
  no trend in happiness

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The Easterlin Paradox
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So, we focus on the short-run responses of
happiness to news.

• Theory from Kimball and Willis (2007) Utility
  and Happiness
• Happiness and News
• After good news about anything, measured
  happiness will temporarily spike up.
• After bad news about anything, measured happiness
  will temporarily dip down.
• Economic Definition of Good and Bad News
• Good news is anything that raises expected
  lifetime utility.
• Bad news is anything that lowers expected
  lifetime utility.

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USA The Happiness Index on the Reuters/UM
Surveys of Consumers

• Now think about the past week and the feelings
  you have experienced. Please tell me if each of
  the following was true for you much of the time
  this past week
• Much of the time during the past week, you felt
  you were happy. (Would you say yes or no)?
• (Much of the time during the past week,) you felt
  sad. (Would you say yes or no?)
• (Much of the time during the past week,) you
  enjoyed life. (Would you say yes or no?)
• (Much of the time during the past week,) you felt
  depressed. (Would you say yes or no?)

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Japan The Osaka University Panel Study of
Happiness Dynamics

• 71 Osaka University Undergraduates
• 49 male, 22 female
• Answered daily web survey for 273 days (so far).
• Often used web-capable cell-phones
• High response rates
• Total of 17258 person-day observations

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Top of the First Page of the Paper Version
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Personal News
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National News
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Histogram of Average Happiness (averaged across
individuals)
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Histogram of Average Personal News Ratings
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Histogram of Average National News Ratings
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Scatterplot of Happiness vs. Same-Day Personal
News
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Scatterplot of Happiness vs. Same-Day National
News
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Average Happiness vs. Average Personal News
Rating
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Average Happiness vs. Average National News
Rating
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Empirical Strategy

• Estimate the time series effect of innovations in
  personal and national news on happiness.
• Allow for individual fixed effects
• Regress personal news ratings on their own lags
  and treat the residuals from this regression as
  true personal news innovations (whitened
  personal news)
• Do the same for national news ratings to
  construct whitened national news.
• Check for nonlinearities in the relationship
  between news ratings and happiness.

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News Ratings vs. Lifetime Utility Innovations

• Our theoretical concept of news is innovations
  in information about lifetime utility. These
  innovations should be unpredictable.
• However, the ordinary language meaning of good
  news and bad news may be somewhat predictable.
  
• We will purge the component of the news ratings
  that are predictable by past news ratings.
• We expect some remaining predictability of news
  ratings as todays information is sometimes
  treated as tomorrows expected news.
• The theory then implies that todays reported
  happiness should be correlated with tomorrows
  news ratings even after controlling for current
  and past news ratings.

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Daily Happiness vs.Daily Personal News
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Increments (Personal)
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Cumulative Increments (Personal)
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Daily Happiness and Daily National News
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Increments (National)
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Whitening (Personal)
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Whitening (National)
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Impulse Response (Personal National)
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Impulse Response (Personal)
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Impulse Response (National)
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Component Impulse Responses (Personal News)
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Component Impulse Responses (National News)
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Impulse Response Neg. Sensitivity (Personal)
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Impulse Response Neg. Sensitivity (National)
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Overshadowing (Personal)
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Overshadowing (Personal)