Publication Type
Working Paper
Version
publishedVersion
Publication Date
12-2024
Abstract
Using 20 years of nationally representative panel data in South Korea, we estimate how life satisfaction responds to income shocks. We document that unexpected income changes significantly impact an individual's life satisfaction, and the magnitudes depend on the persistence of income shocks. We find that permanent income shocks substantially penetrate life satisfaction, while transitory income shocks have minimal impact. We also find that life satisfaction regarding external factors such as family income and leisure activities is more sensitive to income shocks than life satisfaction related to social relationships. Our findings imply that it is critical for the government to address persistent income losses in the economy (e.g., long-term unemployment driven by skill-biased technological changes or work-limiting disability) as a means to improving social welfare.
Keywords
life satisfaction, insurance, income shocks, KLIPS
Discipline
Asian Studies | Behavioral Economics | Income Distribution
Research Areas
Applied Microeconomics
First Page
1
Last Page
46
Publisher
IZA Institute of Labor Economics, Discussion Paper Series, No. 17514
City or Country
Bonn
Citation
AHN, Jiyeon; AHN, Taehyun; and KIM.
Is subjective well-being insured against income shocks? Evidence from 20-year panel data in South Korea. (2024). 1-46.
Available at: https://ink.library.smu.edu.sg/soe_research/2797
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://docs.iza.org/dp17514.pdf
