The Impact of Inflation and Unemployment on Subjective Personal and Country Evaluations

The authors use data from the Gallup World Poll to analyze what determines individual assessments of past, present, and future personal and country well-being. These measures allow the analysis of two dimensions of happiness data not previously examined in the literature: the better-than-average effect and optimism. The authors find that individuals tend to evaluate their personal well-being as being better than their country’s and tend to expect that their future well-being will improve. The authors also analyze the impact of inflation and unemployment on these subjective measures and find that both variables have a negative effect on individuals’ assessments of past and present well-being for themselves and their country; in contrast with other studies, however, they do not find that the effect of unemployment is significantly different from that of inflation