The Lasting Well-being Effects of Early Adulthood Macroeconomic Crises

Abstract

This paper studies the effects of early adulthood macroeconomic crises on subjective well-being later in life. Using repeated cross-section data of over 90 000 individuals from the World Values Survey combined with Angus Maddison's historical data on macroeconomic circumstances, I find that experiencing a macroeconomic crisis at ages 18 to 25 is detrimental to subjective well-being. Individuals who have witnessed a large decline in real GDP in their late teens or early twenties report lower levels of well-being years later. The negative effect is largest for individuals in the bottom half of a country's income distribution.