Does Life Satisfaction predict Economic Preferences? Evidence from cross-sectional data

Abstract

This paper investigates the effect of subjective well-being (SWB) on economic preferences by employing the Gallup World Poll and Global Preference Survey. First, by means of the LASSO ”Least Absolute Shrinkage and Selection Operator,” a regularized regression model, this paper presents evidence that life satisfaction is selected as an explanatory variable for patience, risk, negative reciprocity, altruism, and trust. Second, in order to assess the magnitude and statistical significance along with robust clustered standard errors, this study performs a variable selection process with a post-double-selection approach. The estimated coefficients are statistically significant, with a positive coefficient for patience and risk-taking, a positive and increasing effect exerted by SWB on altruistic behavior and negative reciprocity, and finally, a negative effect observed with respect to trust.