Internet, unmet aspirations and the U-shape of life

The relationship between age and well-being is U-shaped. One recent explanation for this empirical pattern is related to unmet aspirations theory, pointing out that optimism bias decreases life satisfaction at younger ages, whereas pessimism bias increases it at later stages of life. This paper investigates the effects of Internet use on subjective well-being over the life cycle. Our model investigates the proposition that Internet use affects aspirations, and that this effect is relatively stronger at younger and older ages. To investigate moderation effects of Internet use on the U-shape of life, we use the Eurobarometer annual surveys for the years 2010 to 2016, which provide rich information for around 150,000 individuals in all European countries. We focus on the EU Digital Agenda policy program, and exploit exogenous variation in broadband Internet take-up across European countries to identify the causal effects of Internet on life satisfaction for different age groups. The results of 2SLS estimations for a recursive bivariate ordered probit model show that active Internet users have a different well-being pattern over the life cycle compared to less active users. Specifically, we find that Internet use makes the U-shape of life steeper. Country-level evidence on aspiration levels for different demographic and Internet user groups indicates that our empirical results are consistent with unmet aspirations theory.