Optimism, pessimism and life satisfaction: an empirical investigation

We announce a working paper investigating individuals’ levels of optimism and pessimism and their life satisfaction.

This empirical investigation into life satisfaction finds a substantial association with an individual’s thoughts about the future, whether they are optimistic or pessimistic about it. We find that including individuals’ pessimism/optimism about the future substantially increases the explanatory power of standard life satisfaction models. The thoughts that individuals have about the future contribute substantially to their current life satisfaction. In particular, the reduction in life satisfaction experienced by individuals who report being pessimistic is greater than that for well-understood negative events like unemployment.

These effects are attenuated but remain substantial after controlling for individual fixed effects, statistically matching on observable variables between optimistic and pessimistic individuals, and addressing the potential endogeneity of pessimism and optimism to life satisfaction. Moreover, these effects are robust to controlling for future life events that may be anticipated.

The paper, written by Dr. Alan Piper, can be downloaded here, and is available both as a SOEPpaper and an International Institute of Management discussion paper.

Why this particular picture? The epigraph of the paper explains.