The Benefits, Challenges and Insights of a Dynamic Panel assessment of Life Satisfaction

This study discusses and employs dynamic panel data to investigate life satisfaction. A key result is that approximately 90% of the impact of any commonly measured variable on well-being is contemporaneous. This reflects the finding that lagged life satisfaction has a small, positive and significant effect on current life satisfaction. A related key benefit of dynamic panel models include the ability to determine short and long run values of coefficients. Additionally such models make it possible for researchers to choose which explanatory variables are potentially endogenous or exogenous. The challenges of such an analysis are also detailed, which are linked to its complexity particularly when compared with the more standard fixed effects models.