Evolutionary efficiency and distributive effects of inertia in cross-country life-satisfaction

This paper is broadly concerned with understanding the role of evolutionary efficiency in happiness realization. Towards this end, we examine the (distributive and) non-linear effects of inertia in a cross-country setting. We develop a general model of happiness inertia and study its properties in a stochastic and non-linear environment. This allows us to map out the net effects of evolutionary efficiency through 'adaptive capability' in an environment where stochastic shocks are both mean reverting and non mean-reverting. Our empirical estimation for a set of developed economies demonstrate that the adjustment of realized happiness to a stochastic non-mean reverting shock is non-linear implying the involvement of complex socio-economic processes in happiness perception. Moreover, we also find that the adjustment of current level of happiness to the past follows a heterogeneous distribution once again indicating that the extent of temporal (inter-)dependence is non-unique across the happiness distribution. Our results hold interesting policy implications.