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Using data from national socio-economic panel surveys in Australia, Britain and Germany, this paper analyzes the effects of individual preferences and choices on subjective well-being (SWB). It is shown that, in all three countries, preferences and choices relating to life goals/values, partner's personality, hours of work, social participation and healthy lifestyle have substantial and similar effects on life satisfaction. The results have negative implications for a widely accepted theory of SWB, "set-point theory." This theory holds that adult SWB is stable in the medium and long term, although temporary fluctuations occur due to life events. Set-point theory has come under increasing criticism in recent years, primarily due to unmistakable evidence in the German Socio-Economic Panel that, during the last 25 years, over a third of the population has recorded substantial and apparently permanent changes in life satisfaction (Fujita and Diener in "J Pers Soc Psychol" 88:158-64, 2005; Headey in "Soc Indic Res" 85:389-403, 2008a; Headey et al. in "Proc Natl Acad Sci USA" 107(42):17922-17926, 2010). It is becoming clear that the main challenge now for SWB researchers is to develop new explanations which can account for medium and long term change, and not merely stability in SWB. Set-point theory is limited precisely because it is purely a theory of stability. The paper is based on specially constructed panel survey files in which data are divided into multi-year periods in order to facilitate analysis of medium and long term change.

In Sen's Capability Approach (CA) well-being can be defined as the freedom of choice to achieve the things in life which one has reason to value most for his or her personal life. Capabilities are in Sen's vocabulary therefore the real freedoms people have or the opportunities available to them. In this paper we examine the impact of capabilities alongside choices on well-being. There is a lot of theoretical work on Sen's capability framework but still a lack of empirical research in measuring and testing his capability model especially in a dynamic perspective. The contribution of the paper is first to test Sen's theoretical CA approach empirically using 25 years of German and 18 years of British data. Second, to examine to what extent the capability approach can explain long-term changes in well-being and third to view the impact on subjective as well as objective well-being in two clearly distinct welfare states. Three measures of well-being are constructed: life satisfaction for subjective well-being and relative income and employment security for objective well-being. We ran random and fixed effects GLS models. The findings strongly support Sen's capabilities framework and provide evidence on the way capabilities, choices and constraints matter for objective and subjective well-being. Capabilities pertaining to human capital, trust, altruism and risk taking, and choices to family, work-leisure, lifestyle and social behaviour show to strongly affect long-term changes in subjective and objective well-being though in a different way largely depending on the type of well-being measure used. (Contains 7 tables, 1 figure, and 4 footnotes.)

Set-point theory is the main research paradigm in the field of subjective well-being (SWB). It has been extended and refined for 30 years to take in new results. The central plank of the theory is that adult set-points do not change, except temporarily in the face of major life events. There was always some "discordant data," including evidence that some events are so tragic (e.g. the death of one's child) that people never regain their set-point. It was possible to dismiss these events as "exceptions" and maintain the theory. However, several new findings are emerging, which cannot be dismissed as "exceptions" and which appear to require substantial revisions or replacement of set-point theory. Many of these findings are based on the German Socio-Economic Panel Survey (SOEP 1984-), which provides the longest available time series on life satisfaction. Despite its centrality, the concept of the set-point is often not precisely defined. In this paper three alternative working definitions are offered. Depending on which definition is used, it is found that over 20 years 14-30% of German panel members recorded large and apparently permanent changes in their set-points. Changes of this magnitude are not compatible with set-point theory as currently understood. The challenge for SWB researchers now is to develop a theory which can account for change as well as stability.

The paper uses household economic panel data from five countries--Australia, Britain, Germany, Hungary and The Netherlands--to provide a reassessment of the impact of economic well-being on happiness. The main conclusion is that happiness is considerably more affected by economic circumstances than previously believed. In all five countries wealth affects life satisfaction more than income. In the countries for which consumption data are available (Britain and Hungary), non-durable consumption expenditures also prove at least as important to happiness as income.

The purpose of the paper is to assess the theory that the downside risk insurance provided by more generous welfare states generates long run efficiency gains, which counterbalance the short run efficiency losses caused by work disincentives in these states (Feldstein 1974, 1976; Sinn 1995, 1996). Testing downside risk theory requires long term data, so the paper makes use of the three longest running national socio-economic panel surveys. These are the American Panel Study of Income Dynamics (PSID, 1968-), the German Socio-Economic Panel (1984-) and the Dutch Socio-Economic Panel (SEP, 1984-). The paper focusses on prime age households (heads 25-59) and assesses their participation in and returns to adult education and job training. Our results indicate some support for the theory in so far as Dutch and German prime age adults, living in more generous welfare states, were much more likely than Americans to take the risk of foregoing current earnings and investing in additional education. In all three countries returns on investment were substantial.

Using data from the long-running German Socio-Economic Panel Survey (SOEP), this paper provides evidence that life goals matter substantially to subjective well-being (SWB). Non-zero sum goals, which include commitment to family, friends and social and political involvement, promote life satisfaction. Zero sum goals, including commitment to career success and material gains, appear detrimental to life satisfaction. Finding that conscious life goals matter can potentially make an important contribution to SWB theory. The most widely accepted theory--set-point or dynamic equilibrium theory--essentially claims that set-points are near-automatic consequences of hereditary characteristics, including personality traits. Life goals play no role in these theories and major life events are viewed as having only a transitory effect. The SOEP panel data show that, over a 15-20 year period, non-trivial minorities record substantial changes in their set-points. This paper shows linkages between these changes and (a) the personality traits of extraversion, neuroticism and internal locus of control and (b) choice of life goals.

The German and Australian "longitudinal" surveys analysed here are the first national representative surveys to show that (1) people who continuously own a pet are the healthiest group and (2) people who cease to have a pet or never had one are less healthy. Most previous studies which have claimed that pets confer health benefits were "cross-sectional." So they were open to the objection that owners may have been healthier in the first place, rather than becoming healthier due to owning a pet. In both countries the data show that pet owners make about 15% fewer annual doctor visits than non-owners. The relationship remains statistically significant after controlling for gender, age, marital status, income and other variables associated with health. The German data come from the German Socio-Economic Panel in which respondents have been interviewed every year since 1984 (N = 9723). Australian data come from the Australian National Social Science Survey 2001 (N = 1246).

The 1980s and 1990s have been decades of quite good economic growth in North America and much of Western Europe. But how have the fruits of growth been shared? This paper reviews changing income distributions in the U.S., Germany and the Netherlands. These three countries may be taken as exemplars and leading economic performers in "the three worlds of welfare capitalism" (Esping-Andersen, 1990). The U.S. is a liberal welfare-capitalist state, Germany a corporatist state, and the Netherlands (less clearly) a social democratic welfare-capitalist state. The paper focuses particularly on income changes in the bottom, middle and top quintiles and takes a ten year period into account. Previous analyses have shown that labor and market income dispersion are increasing, with increased returns to human capital. The potential impact of government through the tax-transfer system has been largely ignored. All three governments redistribute income from the rich to the poor. However, the paper shows that only the Dutch government has redistributed sufficiently to ensure that the bottom quintile has gained along with others. In Germany and the U.S. the poorest quintile was considerably worse off in absolute terms at the end of the decade.than the beginning. The German government somewhat counteracted the trend towards greater income dispersion by redistributing to the poorest quintile, so the loss of market income was partly compensated. In the U.S. the impact of government on the poorest quintile stayed about the same, so this group ended up with about the same decrease in disposable income as market income. The U.S., Germany and the Netherlands are the only three countries for which ten or more consecutive years of panel data are available. The data come from the PSID-GSOEP Equivalent File 1980-97 and from a comparable file constructed from the Dutch SEP data.

Based on analysis of long-running panel surveys in Germany and Australia, we offer a revised assessment of the relationship between subjective well-being (happiness, life satisfaction) and longevity. Most previous research has reported a linear positive relationship; the happier people are, the longer they live (Diener and Chan in Appl Psychol Health Well-Being 3:1–43, 2011. 10.1111/j.1758-0854.2010.01045.x). Results from these two panels indicate that, if a linear model is assumed, the standard positive relationship between life satisfaction and longevity is found. However, an alternative viewpoint merits consideration. It appears that the relationship between happiness and longevity may be non-linear. The evidence is strong that unhappy people die young. Otherwise, across the rest of the distribution, happiness appears to make no difference to longevity. Our findings are consistent using alternative methods of estimation, and are robust with or without controlling for a range of variables known to affect longevity, including socio-economic variables, behavioral choices (e.g. exercise, smoking) and health status. [ABSTRACT FROM AUTHOR]

Accepted international assessments of living standards in retirement rely on comparing social pension incomes. These assessments conclude that European countries with contributory pension schemes provide retirees with higher living standards than liberal Anglo-American regimes in which many citizens rely on flat rate old age pensions. Comparisons based solely on pension incomes are potentially misleading because the living standards of retirees depend on their total economic resources, particularly their wealth. In this paper we make use of the wealth data in the German (SOEP) and Australian (HILDA) panels. Our revised 'present value' estimates of wealth suggest that Australian and German retirees have approximately the same living standards (mean and median), with much the same distribution (Gini). [ABSTRACT FROM AUTHOR]

The article discusses various reports published within the issue, including a multigeneration analysis of educational expansion in Germany, changes in the wage distribution in Germany starting from the 1990s, and a paper on well-being and unemployment.

Discusses the use of a framework of welfare accounts to assess gains and losses to East and West Germans in the post-reunification period, 1990-1997. Income satisfaction; Capital/stocks account; Subjective welfare/psychic income account; Factor that affects a person's material standard of living.

Psychologists and economists take contradictory approaches to research on what psychologists call happiness or subjective well-being, and economists call subjective utility. A direct test of the most widely accepted psychological theory, set-point theory, shows it to be flawed. Results are then given, using the economists' newer "choice approach"--an approach also favored by positive psychologists--which yields substantial payoffs in explaining long-term changes in happiness. Data come from the German Socio-Economic Panel (1984-2008), a unique 25-y prospective longitudinal survey. This dataset enables direct tests of theories explaining long-term happiness.