Economics serving society

Adaptation to Poverty in Long-Run Panel Data

Andrew Clark, Conchita D’Ambrosio et Simone Ghislandi

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The numerous studies of links between income and well-being converge on two empirical facts: at any given moment, individuals more comfortably off tend to declare themselves happier; on the other hand, average well-being in a country does not rise when per capita GPD increases. The Easterlin paradox thus seems applicable, and one of the explanations often suggested for this is adaptation: after some time, we get used to anything, including a better standard of living. Empirical work confirms this adaptation to diverse “events”, with the exception of unemployment. And yet, is it true that a change in income makes no difference? And what about when the change or the event in question plunges the individual into poverty?
In this article, the question of “adaptation” to poverty is analysed by Andrew Clark, Conchita D’Ambrosio and Simone Ghislandi begin with a sample of more than 45,000 living in Germany between 1992 and 2011. In the preamble, they pose the central question: is subjective well-being really a reliable indicator of the health of a society? They argue in favour of systematically taking into account the objective conditions of life, because the adaptation to poverty conclusion is rather discouraging: if after a certain time, the poorer feel less “unhappy” then why help them? In the German data, as expected, the well-being of individuals who fall into poverty decreases; de facto, those who live on low or very low incomes have a lower sense of well-being. More surprising, the authors stress, this is persistent: only a very small proportion of people say that with time, they feel a little better despite their bad material and financial situation. For the great majority, the reasons for the deterioration of their situation, the length of the period of difficulty, and even the different degrees of poverty have almost no influence on this observation: they do not get used to poverty.
Original title of the article: Adaptation to Poverty in Long-Run Panel Data
Published in: PSE Working Papers n°2014-01
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