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

Jacob Gerner Hariri, Christian Bjørnskov, Mogens Kamp Justesen

    Research output: Working paperResearch

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    This paper 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 micro-level survey data, which – incidentally – was collected in the days surrounding the devaluation. The chance occurrence of the devaluation during the time of the survey enables us to use pre-treatment 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
    Place of PublicationWashington, DC
    PublisherThe World Bank
    Number of pages39
    Publication statusPublished - 2015
    SeriesWorld Bank. Policy Research Working Papers (Online)

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