Alumni Changing the World

Olga Popova: “Life Satisfaction and the Euro Adoption”

(joint work with Vladimir Otrashchenko)

Room 4, 2nd floor

Abstract:

In this paper we evaluate the impact of individual attitudes towards the euro introduction on individual life satisfaction in 16 European countries. Using the difference-in-differences approach, we find that the effects of the euro introduction on the well-being of supporters and opposers of the single European currency, namely the euro, are similarly negative for the EU12 countries. For instance, in Ireland the well-being of supporters is dropped by 11% and opposers by 9%. However, the negative e¤ect for both supporters and opposers in countries, such as Austria and Belgium, is mitigated within one year. Regarding the new member countries, such as the Cyprus Republic, Malta, Slovakia and Slovenia, the  effects of the euro introduction are more diverse. That is, the positive for supporters and opposers in the Cyprus Republic, and for supporters in Malta and Slovakia; the negative for supporters and opposers in Slovenia; and not changed for opposers in Malta and Slovakia. Also, changes in life satisfaction in new members are less spread than in the EU12 countries. The empirical findings of this paper can be used by countries that are about to join the euro area or undertake similar kinds of the regional financial integration.