Economic Shocks and Subjective Well-being: Evidence from a Quasi-Experiment

Jacob Gerner Hariri, Christian Bjørnskov, Mogens Kamp Justesen

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    Abstract

    This article examines how economic shocks affect individual well-being in developing countries. Using the case of a sudden and unanticipated currency devaluation in Botswana as a quasi-experiment, we examine how this monetary shock affects individuals' evaluations of well-being. We do so by using microlevel survey data, which-- incidentally--were collected in the days surrounding the devaluation. The chance occurrence of the devaluation during the time of the survey enables us to use pretreatment respondents, surveyed before the devaluation, as approximate counterfactuals for post-treatment respondents, surveyed after the devaluation. Our estimates show that the devaluation had a large and significantly negative effect on individuals' evaluations of subjective well-being. These results suggest that macroeconomic shocks, such as unanticipated currency devaluations, may have significant short-term costs in the form of reductions in people's sense of well-being
    Original languageEnglish
    JournalThe World Bank Economic Review
    Volume30
    Issue number1
    Pages (from-to)55-77
    Number of pages23
    ISSN0258-6770
    DOIs
    Publication statusPublished - 2016

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