Wednesday, November 6, 2019

Lindqvist, Östling, and Cesarini (2018) on Lottery Wealth and Happiness

Erik Lindqvist, Robert Östling, and David Cesarini, “Long-run Effects of Lottery Wealth on Psychological Well-being.” NBER Working Paper No. 24667, May 2018 [pdf of a similar version here]. 

 Adaptation might suggest that the (exaggerated?) hedonic benefits from a monetary windfall will be short-lived. 

 Lottery data can help us identify the extent to which wealth causes increased happiness or life satisfaction, in both the short and the long run. 

 The authors look at Swedish lottery winners 5 to 22 years after their stroke of good fortune. 

 The estimation undertaken here of how much happiness flows from wealth compares very similar people: they are all lottery winners, but the amounts they won differ. 

 Happiness and Life Satisfaction are reported on an 11-point scale. They are highly positively correlated, though are influenced differently by wealth. Other variables collected are Mental Health, and Financial Life Satisfaction.

 Life Satisfaction is raised by an extra $100,000, and the effect is lasting. 

 The source of the increased Life Satisfaction is improved Financial Life Satisfaction. (Yes, a financial windfall improves one's financial satisfaction!)

 Happiness and Mental Health are not improved (in the long run) by a lottery win. 

 This research was all pre-registered: opportunities to p-hack are minimal; N ≈ 3350 

  Lottery winners in this sample tend to behave prudently  they don't squander their winnings in a short period of time. 

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