Life Satisfaction and the Euro Adoption

Researchers: Olga POPOVA (IOS and CERGE-EI Prague), Vladimir Otrachshenko (Nova School of Business and Economics, Lisbon)
Keywords: life satisfaction, economic integration, euro
Funding: IOS, Nova School of Business and Economics
Project duration: 2011-

This paper analyzes the perceived impact of the euro introduction on the life satisfaction of individuals in 16 European economies, namely 12 European economies that introduced the euro in 2002 and 4 new members of the eurozone. Using data from the Eurobarometer surveys and applying the difference-in-differences approach, we explore which groups were mostly affected by the euro introduction and whether the life satisfaction of the individuals adapted to the euro introduction within the short period of time. Additionally, we test the association between the changes in life satisfaction and perceived changes in prices after the euro introduction. The empirical findings suggest that individuals perceived the impact of the euro introduction differently. In most EU12 countries, the individuals perceived the euro introduction negatively, while the individuals from most new member countries were either not affected or affected positively. Also, we find that for females and unemployed there is a negative association between the change in life satisfaction and the perceived increase in prices. Our results also provide evidence of an adaptation to the euro introduction within two years for some groups. These findings are particularly relevant for analyzing the sources of public opinion regarding the euro introduction.