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Can Marginal Rates of Substitution Be Inferred from Happiness Data? Evidence from Residency Choices
Daniel J. Benjamin, Ori Heffetz, Miles S. Kimball, and Alex Rees-Jones
American Economic Review. Nov 2014, Vol. 104, No. 11: Pages 3498-3528

Can Marginal Rates of Substitution Be Inferred from Happiness Data? Evidence from Residency Choices

Daniel J. Benjamin1, Ori Heffetz2, Miles S. Kimball3 and Alex Rees-Jones4

1Department of Economics, Cornell University, 480 Uris Hall, Ithaca, NY 14853, and NBER (e-mail: )

2S. C. Johnson Graduate School of Management, Cornell University, 324 Sage Hall, Ithaca, NY 14853, and NBER (e-mail: )

3Department of Economics, University of Michigan, 312 Lorch Hall, Ann Arbor, MI 48109, and NBER (e-mail: )

4The Wharton School, University of Pennsylvania, 553 Jon M. Huntsman Hall, 3730 Walnut St., Philadelphia, PA 19104 (e-mail: )

Abstract

We survey 561 students from US medical schools shortly after they submit choice rankings over residencies to the National Resident Matching Program. We elicit (i) these choice rankings, (ii) anticipated subjective well-being (SWB) rankings, and (iii) expected features of the residencies (such as prestige). We find substantial differences between choice and anticipated-SWB rankings in the implied trade-offs between residency features. In our data, evaluative SWB measures (life satisfaction and Cantril's Ladder) imply trade-offs closer to choice than does affective happiness (even time-integrated), and as close as do multimeasure SWB indices. We discuss implications for using SWB data in applied work. (JEL D12, I31)