The Structure of Happiness: A Vector Autoregressive Approach

Subjective well-being is a complex phenomenon coevolving with events in important do-mains of life. Panel vector autoregressions are a suitable tool to analyze the underlyingstructure of changes in happiness and its coevolution with changes in income, health, wor-ries, marital status and employment status. With this technique we can simultaneously ana-lyze the impact of the aforementioned factors on each other for the German Socio-EconomicPanel (SOEP) data set. We nd that positive changes in the named life domains are followedby decreases in subjective well-being (except for health, which is followed by well-being in-creases). Moreover, positive changes in well-being are followed by positive changes in mostlife domains. These ndings are robust to dierent model specications and comparable tosimilar ndings for the British populace. We also examine how the structure of happinessdiers with respect to dierent \Big Five" personality traits. Personality plays an importantrole, especially with regard to high traits of Neuroticism and Extraversion.