A Structural Model of Well-being: with an application to German Data

In this paper we attempt to explain individual, ordinally comparable,satisfaction levels. We postulate a simultaneous equation model where general satisfaction is explained by exogenous shock and level variables, and by the values of the satisfactions with respect to six distinct endogenous domains of life. Taking into account that these satisfactions were categorically measured and allowing for individual effects, the model was estimated on six consecutive waves of the German Socio-Economic Panel. The results are statistically very significant and plausible.The main conclusions of this paper are:given the fact that we get stable significant and intuitively interpretable results, the assumption of interpersonal (ordinal) comparability of satisfactions cannot be rejected on the grounds that it leads to insignificant or implausible results;It is possible to explain satisfactions to a large extent by objectively measurable variables;Domain Satisfactions are strongly interrelated because of common explanatory variables;General Satisfaction may be seen as an aggregate of the six domain satisfactions

Nominal or Real? The Impact of Regional Price Levels on Satisfaction with Life

According to economic theory, real income, i.e., nominal income adjusted for purchasing power, should be the relevant source of life satisfaction. Previous work, however, has only studied the impact of inflation adjusted nominal income and not taken into account regional differences in purchasing power. Therefore, we use a novel data set to study how regional price levels affect satisfaction with life. The data set comprises about 7 million data points that are used to construct a price level for each of the 428 administrative districts in Germany. We estimate pooled OLS and ordered probit models that include a comprehensive set of individual level, time-varying and time-invariant control variables as well as control variables that capture district heterogeneity other than the price level. Our results show that higher price levels significantly reduce life satisfaction. Furthermore, we find that a higher price level tends to induce a larger loss in life satisfaction than a corresponding decrease in nominal income. A formal test of neutrality of money, however, does not reject neutrality of money. Our results provide an argument in favor of regional indexation of government transfer payments such as social welfare benefits

The Anatomy of Subjective Well-being

This paper contributes to the literature on subjective well-being (SWB) by taking into account different aspects of life, called domains, such as health, financial situation, job, leisure, housing, and environment. We postulate a two-layer model where individual total SWB depends on the different subjective domain satisfactions. A distinction is made between long-term and short-term effects. The individual domain satisfactions depend on objectively measurable variables, such as income. The model is estimated using a large German panel data set

The (Non-)Effect of Unemployment Benefits:Variations in the effect of unemployment on life-satisfaction between EU countries

A negative effect of unemployment on subjective well-being has been demonstrated in many studies casting substantial doubt about assumptions of decisions of individuals to choose unemployment voluntarily as the utility-maximising option. These studies have been extended to take into account national-level context factors which have been shown to moderate the relationship between unemployment and life-satisfaction. So far most studies focussed mainly on economic indicators, although demographic and cultural differences between countries also affect how unemployment is perceived. An important variable that is not included in the majority of proper multilevel studies is the extent of unemployment benefits. Traditional micro-economic approaches argue that more extensive provisions should reduce the cost of unemployment and therefore reduce the motivation to regain employment—reflected in a reduction of the negative impact of unemployment. This study investigates this claim by using European Values Study data from all European Union countries and Norway as well as harmonised macroeconomic statistics from Eurostat. It finds that the effect of unemployment on life-satisfaction is indeed moderated by economic and demographic national-level factors, but not by unemployment benefits. To what extent unemployment reduces life-satisfaction varies greatly between countries, but appears to not be influenced by the extent of state unemployment provisions

The Emerging Aversion to Inequality: Evidence from Poland 1992-2005

This paper provides an illustration of the changing tolerance for inequality in a context of radical political and economic transformation and rapid economic growth. We focus on the Polish experience of transition and explore self-declared attitudes of the citizens. Using monthly representative surveys of the population, realized by the Polish poll institute (CBOS) from 1992 to 2005, we identify a structural break in the relation between income inequality and subjective evaluation of well-being. The downturn in the tolerance for inequality (1997) coincides with the increasing distrust of political elites.http://deepblue.lib.umich.edu/bitstream/2027.42/64387/1/wp919.pd

Well-being inequality and reference groups: an agenda for new research

In this paper it is argued that subjective well-being (SWB) of the individual depends on two types of variables. The first type consists of characteristics of the individual himself, such as age, health, income, etc. The second type of variables consists of the characteristics of the individuals belonging to his reference group. The vast literature about happiness, quality of life, and well-being informs us extensively about the effects of objective variables. How the second type affects well-being is much less investigated. It is argued that the concept of well-being inequality cannot be properly defined without taking the referencing process into account. The reference effect depends on how frequently individuals compare with others and on the degree of social transparency in society. We attempt to give a structural embedding of the idea of reference groups in SWB-models. In this paper we employ the reference-extended model for incorporating in happiness studies the concept of inequality in happiness or SWB. Finally, we plead for an extension of the present happiness paradigm by setting up a new additional agenda for empirical research in order to get quantified knowledge about the referencing process. As a first step we suggest a new question module to be included in new survey questionnaires. <br/

Another Avenue for Anatomy of Income Comparisons : Evidence from Hypothetical Choice Experiments

September 2010, Revised December 2010, Secondly Revised November 2011, Thirdly Revised May 2012, Fourthly Revised March 2013

Life satisfaction and confidence in national institutions: evidence from South America

A number of South American countries experienced turbulent democratic, political and economic upheaval over the last 40 years in the form of coup d’états in the 1970s, tumultuous elections, and repeated severe economic crises, some of which happened fairly recently. Starting in 2010, a number of court proceedings across the region have made past military coup d’états the focus of national conversations. South American citizens may, therefore, have lost confidence in national institutions that have repeatedly disappointed their trust and expectations; a situation with potentially detrimental effects on their well-being. Using eight waves of the Gallup World Poll collected between 2009 and 2016 across ten South American countries, we investigate to what extent people’s confidence in financial institutions, the honesty of elections, the military, the judicial system, the national government and the police is associated with people’s current and expectation of future life satisfaction. We find that people who report confidence in these six institutions rate their current and expected life satisfaction, on average, to be higher than those who lack these types of institutional confidence, even after controlling for demographic factors and macroeconomic indicators. In addition, we investigate changes over time for all six measures of confidence in institutions as well as for current and expectation of future life satisfaction. Our results suggest that governments’ investments in well-functioning institutions may contribute positively to subjective well-being in a society. However, our analysis is correlational and we thus cannot rule out reverse causality

Who settles for less? Subjective dispositions, objective circumstances, and housing satisfaction

In recent years there has been growing interest in individuals’ self-perceptions of their wellbeing on the grounds that these complement well-established objective indicators of welfare. However, individuals’ assessments depend on both objective circumstances and subjective, idiosyncratic dispositions, such as aspirations and expectations. We add to the literature by formulating a modelling strategy that uncovers how these subjective dispositions differ across socio-demographic groups. This is then tested using housing satisfaction data from a large-scale household panel survey from Australia. We find that there are significant differences in the way in which individuals with different characteristics rate the same objective reality. For instance, male, older, migrant, and Indigenous individuals rate equal housing conditions more favourably than female, younger, Australian-born, and non-Indigenous individuals. These findings have important implications for how self-reported housing satisfaction, and wellbeing data in general, are to be used to inform evidence-based policy