Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/18539
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dc.contributor.authorWunder, Christophen_US
dc.contributor.authorSchwarze, Johannesen_US
dc.contributor.authorKrug, Gerharden_US
dc.contributor.authorHerzog, Bodoen_US
dc.date.accessioned2009-01-28T15:47:49Z-
dc.date.available2009-01-28T15:47:49Z-
dc.date.issued2006en_US
dc.identifier.urihttp://hdl.handle.net/10419/18539-
dc.description.abstractUsing merged data from the British Household Panel Survey (BHPS) and the German Socio-Economic Panel (SOEP), this paper applies a parametric difference-in-differences approach to assess the real effects of the introduction of the euro on subjective well-being. A complementary nonparametric approach is also used to analyze the impact of difficulties with the new currency on well-being. The results indicate a severe loss in well-being associated with the introduction of the new currency, with the predicted probability that a person is contented with his/her household income diminishing by 9.7 percentage points. We calculate a compensating income variation of approximately one-third. That is, an increase in postgovernment household income of more than 30% is needed to compensate for the rather drastic decline in well-being. The reasons for the negative impact are threefold. First, perceived inflation overestimates the real increase in prices resulting in suboptimal consumption decisions. Second, money illusion causes a false assessment of the budget constraint. Third, individuals have to bear the costs from the conversion and the adjustment to the new currency. Moreover, it is thought that losses are smaller when financial ability is higher. However, the impact of difficulties in using and converting the new currency is rather small, and the initial problems were overcome within one year of the introduction of euro cash.en_US
dc.language.isoengen_US
dc.publisher|aDeutsches Institut für Wirtschaftsforschung (DIW) |cBerlinen_US
dc.relation.ispartofseries|aDIW Discussion Papers |x646en_US
dc.subject.jelI31en_US
dc.subject.jelE31en_US
dc.subject.ddc330en_US
dc.subject.keywordsubjective well-beingen_US
dc.subject.keywordeuro cash changeoveren_US
dc.subject.keywordperceived inflationen_US
dc.subject.keyworddifference-in-differencesen_US
dc.titleWelfare Effects of the Euro Cash Changeoveren_US
dc.typeWorking Paperen_US
dc.identifier.ppn521128935en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungen-
dc.identifier.repecRePEc:diw:diwwpp:dp646en_US

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