Deconstructing the hedonic treadmill: Is happiness autoregressive?

Affective habituation is well-documented in social sciences: people seem to adapt to many life events, ranging from lottery windfalls to terminal illnesses. A group of studies have tried to measure habituation by seeing how lagged values of life events affect present happiness. We propose an additional adaptation channel: current happiness may depend directly on past happiness, which amounts to assessing whether happiness is autoregressive. We run dynamic happiness regressions using individual-level panel data from the German Socio-Economic Panel Study, the Japanese Panel Survey of Consumers, the British Household Panel Survey and the Swiss Household Panel. As in previous studies, the coefficients on lagged events (e.g., becoming unemployed, getting married) suggest strong habituation. However, all the econometric models suggest that the coefficient on lagged happiness is positive and significant. We discuss whether this may be evidence of happiness having an inertial force (besides the usual habituation channel).

Research highlights
► Evolutionary theories of hedonic states (Rayo and Becker, 2007 and Perez Truglia, 2009) propose that hedonic states may be autoregressive: i.e. current happiness may depend directly on past happiness.
► We test that hypothesis by running dynamic happiness regressions using individual-level panel data from the German Socio-Economic Panel Study, the Japanese Panel Survey of Consumers, the British Household Panel Survey and the Swiss Household Panel.
► As in previous studies, the coefficients on lagged events (e.g., becoming unemployed, getting married) suggest habituation.
► However, the estimated coefficient on lagged happiness is positive and significant. We discuss whether this may be evidence of happiness having an inertial force (besides the usual habituation channel).