Subjective Wellbeing Dynamics

• Published date: 01 December 2021
• Author: David W. Johnston,Olena Stavrunova
• Date: 01 December 2021
• DOI: http://doi.org/10.1111/1467-8462.12442

The Australian Economic Review, vol. 54, no. 4, pp. 518–529 DOI: 10.1111/1467-8462.12442

Subjective Wellbeing Dynamics

David W. Johnston and Olena Stavrunova*

Abstract

A large multidisciplinary literature has sought

to explain how a person's wellbeing changes

over time in response to individual life events

(for example, unemployment), and to larger

scale interventions and events (for example,

natural disasters). The Household, Income

and Labour Dynamics in Australia (HILDA)

Survey has been a key data source for such

explorations because of its consistency, long-

evity and breadth of information. Through a

review of past studies, we highlight some

important features in the dynamics of sub-

jective wellbeing; particularly focusing on the

speed of adaptation to wellbeing shocks, and

the presence of heterogeneity in adaptation

profiles.

1. Introduction

There are now thousands of studies from

numerous social science disciplines ex-

ploring people's subjective wellbeing

(Diener, Oishi and Tay 2018). These well-

being data have provided ‘insight into the

way that people learn, work, and live, and

what makes their lives satisfactory and

happy, or what causes them pain and stress’

(Stone and Krueger 2018, p. 164). It has

been shown, for example, that subjective

wellbeing is strongly correlated with health

(McNamee and Mendolia 2014), income

(Ambrey and Fleming 2014a), marriage

(Evans and Kelley 2004), employment

status (Wooden, Warren and Drago 2009),

religiosity (Kortt, Dollery and Grant 2015),

and community social support (Shields,

Price and Wooden 2009).

An important segment of this broad literature

is focused on explaining how a person's well-

being changes over time in response to individual

life events—such as unemployment, financial

windfall, divorce and illness—and to larger scale

interventions and events—such as terrorism and

natural disasters. A typical methodology is to use

person‐level panel data to follow the same

individuals before, during and after the event or

policy, often relying on fixed‐effects regression

analysis (for examples, see Kassenboehmer and

Haisken‐DeNew 2009; Frijters, Johnston and

Shields 2011; Rehdanz et al. 2015; Clark, Doyle

and Stancanelli 2020). A common aim of these

studies is to determine whether there is

adaptation—a process in which wellbeing reverts

*Johnston: Centre for Health Economics, Monash

University, 900 Dandenong Road, Caulfield East, VIC

3145, Australia; Stavrunova: Economics Discipline

Group, University of Technology Sydney, PO Box 123,

Broadway NSW 2007 Australia. Corresponding author:

Johnston, email <david.johnston@monash.edu>. This

article uses unit record data from the Household,

Income and Labour Dynamics in Australia (HILDA)

Survey. The HILDA Project was initiated, and is funded,

by the Australian Government Department of Social

Services (DSS) and is managed by the Melbourne

Institute of Applied Economic and Social Research

(Melbourne Institute). The findings and views reported

in this article, however, are those of the authors and

should not be attributed to either DSS or the Melbourne

Institute.

© 2021 The University of Melbourne, Melbourne Institute: Applied Economic & Social Research,

Faculty of Business and Economics

Published by John Wiley & Sons Australia, Ltd