Equivalence Scales in an Intertemporal Setting with an Application to the Former West Germany

Equivalence scales provide answers to questions like how much a household with two children needs to spend compared to a couple to attain the same welfare level. These are important questions for child allowances, social benefits and to assess the cost of children over the life-cycle for example. We discuss equivalence scales in an intertemporal setting with uncertainty. To estimate equivalence scales we use a panel from German households (GSOEP) containing subjective data on satisfaction with life and satisfaction with income to represent the welfare level. Because satisfaction is measured on a discrete scale we use limited dependent variable models for panel data in estimation. Using satisfaction with life data we find that larger households do not need any additional income to be as satisfied as a couple. Using satisfaction with income, however, yields equivalence scales that increase with household size.     

Life Satisfaction and Longevity: Longitudinal Evidence from the German Socio‐Economic Panel

We investigate the relationship between life satisfaction and mortality using the German Socio‐Economic Panel, which allows us to follow around 15,000 people for more than two decades. Seventeen per cent of the respondents surveyed in 1984 died between 1984 and 2007. After controlling for initial health conditions, we find that people's life satisfaction at the beginning of the survey is deeply linked to their life expectancy: a ten per cent increase in life satisfaction is connected to a four per cent decline in the probability of death in the period studied. The relationship between life satisfaction and mortality is stronger for the married and the men but life satisfaction does not matter for the women. We find some suggestive evidence that links between life satisfaction and mortality could be operating via accidents and mental health. Finally, we show that the life satisfaction measured in 1984 extends to the rest of life: people who were happier in 1984 more frequently experienced high levels of happiness in the rest of their lives. These results suggest that life satisfaction is a powerful risk‐factor for later mortality and is more predictive of mortality than a host of other variables.     

Assessing the role of components of life satisfaction

Factors affecting subjective well-being and their gross effect measurement have been widely studied. However, how people derive utility from these factors has not been fully explored. This article provides a way to decompose the gross effect of major determinants on life satisfaction into direct and indirect effects and make inference for the latter. Because the indirect effect is nonlinear in parameters associated with different models in an equation system, it creates a problem in estimating the standard error. Besides, the categorical nature in survey data further introduces bias to the covariance estimation even asymptotically. To address these issues without knowing the form of heteroskedasticity under the null hypothesis, we propose to extend the wild bootstrap procedure in this particular context. Its robustness against various data properties is validated via several simulation experiments. Using three recent waves of World Values Survey, we find that the relative importance of life control has significantly increased recently, and endowing citizens with the right to enjoy their freedoms and liberties is a more effective policy in raising life satisfaction than promoting national income.     

About time: Daylight Saving Time transition and individual well-being

Daylight Saving Time is controversial due to its alleged negative impact on individual well-being. Using panel data from Germany we find evidence that the transition to summer time has negative influence on general life satisfaction and mood, which is stronger for those in full time employment.     

Valuing scenic amenity using life satisfaction data

The life satisfaction approach has recently emerged as a new technique in the suite of options available to non-market valuation practitioners. Employing data from the Household, Income and Labour Dynamics in Australia (HILDA) survey and Geographic Information Systems (GIS), this paper examines the influence of scenic amenity on the life satisfaction of residents of South East Queensland (SEQ), Australia. Measuring scenic amenity on a 10-point scale, it is found that, on average, a respondent is willing-to-pay approximately AUD$14,000 in household income per annum to obtain a one-unit improvement in scenic amenity. However, on closer inspection, we find that the relationship between willingness-to-pay and the level of scenic amenity is not linear. To our knowledge, this is the first paper to value scenic amenity using the life satisfaction approach and is the first paper to use this approach to value any type of environmental good or service in SEQ. As such, this paper represents a genuine contribution to a small, yet growing, body of literature.     

Changes in health-related quality of life: a compensating income variation approach

This paper investigates the relationship between negative changes in health and life satisfaction, using a sample from the Household, Income and Labour Dynamics of Australia Survey. We use panel data models and estimate the life satisfaction impact of several different changes in health status to calculate the Compensating Income Variation (CIV) of them. Our work innovates with respect to the existing literature by using a more robust CIV method that takes account of the potential measurement error in income. Further, we produce the first set of monetary values for health losses using SF-6D utility values, one of the main measures used to estimate and value health change for economic evaluation. We show that negative changes in SF-6D are significantly associated with a reduction in life satisfaction, and the starting point matters: a drop of 0.1 in SF-6D score is associated with a decrease of 0.12 points in life satisfaction if the starting utility value is 0.8, but the effect is 100% higher if the SF-6D starting point is 0.7. More generally, we find that a 0.1 deterioration in SF-6D has a strong association with life satisfaction and that the CIV value is substantial (over US$ 120,000).     

How well do individuals predict their future life satisfaction? Evidence from panel data following a nationwide exogenous shock

Abstract .  Using German panel data, we investigate how well individuals predict their own future life satisfaction. The context is the decade following the 1990 reunification of Germany, which provided a large shock to the future prospects of the inhabitants of the former East Germany. We find that the majority of East Germans significantly overestimated the satisfaction gains from reunification in the years immediately after transition, but by 1994 had converged on correct aggregate expectations. Some evidence of micro-heterogeneity in the prediction errors is found by age and education. For West Germans, we find some initial over-optimism, although less than for East Germans.     

Material and nonmaterial impacts of the COVID-19 pandemic: Evidence from a low-income country

How have COVID-19-related restrictions affected consumption levels and life satisfaction in low-income countries? We conducted phone surveys with 577 households in Liberia to compare consumption patterns across three points in time: November 2019 (pre-COVID-19), May 2020 (short term), and September 2020 (medium term). This article analyzes the impacts of the Covid-19 pandemic and the related restrictions on food and nonfood consumption, which we categorize as “material” welfare and life satisfaction, which we categorize as “nonmaterial” welfare. We find differences between food and nonfood consumption patterns under pandemic conditions. In particular, consumption by households dependent on food and labor markets was negatively affected by the pandemic. In terms of life satisfaction, we find that most respondents perceived their lives to have worsened due to the pandemic.     

Adolescents’ (un)happiness in transition

In this paper, we analyse the life satisfaction of adolescents in transition countries, comparing their life satisfaction with that of their peers in non-transition countries. We find that, at the start of transition, ceteris paribus, the life satisfaction of the adolescents in our sample of transition countries is somewhat smaller, but not significantly so, than the life satisfaction of the adolescents in our sample of non-transition countries. With the economic crisis of the early 1990s, however, the difference increased dramatically, but, by the beginning of the 2000s, this gap had again become fairly limited. From that point, respondents’ health situation, their material wealth and their school experience mattered much more than whether they lived in a transition country or not. Unlike the literature on adults, we do not find that after controlling for individual level variables, macro variables play an important role in adolescent happiness.     

家庭养老方式下的老年人生活满意度研究——基于CHARLS数据的实证分析

以CHARLS微观数据为基础,对老年人生活满意度与家庭经济支持、日常照料、沟通联系三方面自变量进行描述统计分析与Spearman相关性检验,并通过二项Logistic回归模型进行深入分析。结果表明,在家庭养老方式下,老年人的生活满意度与家庭的经济支持、日常照料、沟通联系之间存在显著关联,获得家庭经济支持的老年人生活满意度要高于未获得家庭经济支持的老年人,缺乏家人日常照料的老年人的生活满意度要低于得到家人较多照料的老年人,与家人的沟通联系较为密切的老年人有着相对更高的生活满意度。     

Well-being and doctor visits: The mediating role of a healthy diet

Subjective well-being is associated with many positive health outcomes. However, little is known about whether these favourable outcomes translate into a reduction in the number of doctor visits. Using large-scale panel data from Australia, we find that individuals with high life satisfaction need fewer visits to their family doctor or general practitioner. We also present evidence on the pathways underlying this relationship, showing it is significantly explained by a person's diet. These findings remain after correcting for sample selection bias using Heckman's approach as well as controlling for various confounding factors.     

Life Satisfaction Dynamics with Quarterly Life Event Data*

Using life satisfaction responses from Australian panel data we examine the questions of when and to what extent individuals are affected by major positive and negative life events, including changes in financial situation, marital status, death of a close relative, and being the victim of crime. The key advantage of our data is that we are able to identify these events on a quarterly basis rather than on the yearly basis used by previous studies. We find evidence that life events are not randomly distributed, that individuals anticipate major events to a large extent, and that they fully adapt to many events within 12 months. The estimates can be used to calculate monetary values needed to compensate individuals for life events. Using a new valuation methodology that incorporates these dynamic factors produces considerably smaller compensation valuations than those calculated using the standard approach.     

The social costs of unemployment: accounting for unemployment duration

This article contributes to the literature on unemployment and well-being by investigating the linkage between personal life satisfaction and a macroeconomic indicator of the duration of unemployment. Using data for more than 50?000 individuals in 10 European countries, 1992–2002, we find that the social costs of unemployment, in terms of general unemployment's impact on life satisfaction, relate significantly and to a considerable extent to unemployment duration. It is thus not just the risk of becoming or staying unemployed that people worry about, but especially the prospect of staying long-term unemployed. This fear affects employed and unemployed people alike. Our findings provide a strong point for focusing labour market policies on long-term unemployment, in addition to considerations of human capital depreciation.     

Differences in the effects of informal family caregiving on health and life satisfaction between wives and husbands as caregivers

We analyze whether or not informal family caregiving worsens caregivers’ health and life satisfaction among Japanese married middle‐aged and elderly individuals from the Japanese Study of Aging and Retirement. Unlike previous studies, we distinguish between wives and husbands as caregivers and between one's own and one's spouse's parents as care recipients. We find women's depressive state is negatively associated with caregiving for spousal parents both in our instrumental variable estimations and fixed‐effect panel analysis, and also find women's life satisfaction is negatively associated with caregiving for spousal parents in our fixed‐effect panel analysis, though only marginally so. However, as our results are marginally significant, caregiving for either own or spousal parents does not seem to matter much for caregiver's health or life satisfaction. All that can be said for certain in our paper is that men's subjective health, depressive state, and life satisfaction are generally less sensitive to informal care, for both spousal and own parents, than that of women.     

Neighbors' Income,Public Goods,and Well‐Being

How does neighbors' income affect individual well‐being? Our analysis is based on rich U.S. local data from the Behavioral Risk Factor Surveillance System, which contains information on where respondents live and their self‐reported well‐being. We find that the effect of neighbors' income on individuals' self‐reported well‐being varies with the size of the neighborhood included. In smaller areas such as ZIP codes, we find a positive relationship between median income and individuals' life satisfaction, whereas it is the opposite at the county, MSA, and state levels. We provide evidence that local public goods and local area characteristics such as unemployment, criminality, and poverty rates drive the association between satisfaction and neighbors' income at the ZIP code level. The neighbors' income effects are mainly concentrated among poorer individuals and are as large as one quarter of the effect of own income on self‐reported well‐being.     

There and back again – estimating equivalence scales with measurement error

Using income satisfaction data from the German Socio-Economic Panel, we find large differences in the equivalence weight of a partner when it is being estimated by direct and reverse regressions. We argue that neither of the two models will produce consistent estimates when there is stochastic error in satisfaction and measurement error in incomes. We propose a correction of mismeasured incomes using a constructed alternative income measure. The corrected results are relatively close to those obtained from direct regression. We do not find evidence that previous studies, using the direct regression method, severely suffer from measurement error in incomes.     

Estimating worldwide life satisfaction

Whilst studies of life satisfaction are becoming more common-place, their global coverage is far from complete. This paper develops a new database of life satisfaction scores for 178 countries, bringing together subjective well-being data from four surveys and using stepwise regression to estimate scores for nations where no subjective data are available. In doing so, we explore various factors that predict between-nation variation in subjective life satisfaction, building on Vemuri and Costanza's (Vemuri, A.W., & Costanza, R., 2006. The role of human, social, built, and natural capital in explaining life satisfaction at the country level: toward a National Well-Being Index (NWI). Ecological Economics, 58:119-133.) four capitals model. The main regression model explains 76% of variation in existing subjective scores; importantly, this includes poorer nations that had proven problematic in Vemuri and Costanza's (Vemuri, A.W., & Costanza, R., 2006. The role of human, social, built, and natural capital in explaining life satisfaction at the country level: toward a National Well-Being Index (NWI). Ecological Economics, 58:119-133.) study. Natural, human and socio-political capitals are all found to be strong predictors of life satisfaction. Built capital, operationalised as GDP, did not enter our regression model, being overshadowed by the human capital and socio-political capital factors that it inter-correlates with. The final database presents a stop-gap resource that, until robust surveys are carried out worldwide, allows comparisons of subjective life satisfaction between nations to be made with reasonable confidence.     

Are optimistic expectations keeping the Chinese happy?

In this paper we study the effect of optimistic income expectations on life satisfaction amongst the Chinese population. Using a large scale household survey conducted in 2002 we find that the level of optimism about the future is particularly strong in the countryside and amongst rural-to-urban migrants. The importance of these expectations for life satisfaction is particularly pronounced in the urban areas, though also highly significant for the rural area. If expectations were to reverse from positive to negative, we calculate that this would have doubled the proportion of unhappy people and reduced proportion of very happy people by 48 per cent. We perform several robustness checks to see if the results are driven by variations in precautionary savings or reverse causality.     

What Contributes to Life Satisfaction in Transitional Romania?

This paper analyzes life satisfaction in Romania in 2001, 12 years after the collapse of communism and the beginning of the transition into a market economy. Using a survey of 1770 individuals, we find that our results are very similar to studies in Western Europe and the USA. Life satisfaction increases with housing standard, health status, economic situation, education, trusting other people, and living in the countryside, and decreases with rising unemployment. However, life satisfaction is lower than in Western countries with about 74% of the people in the sample being not at all satisfied or not quite satisfied with their life in general, and the remaining part being quite satisfied or very satisfied. A policy discussion concludes the paper.     

“I even met happy gypsies”

Economic studies of the Roma population, which is the largest and the poorest ethnic minority in Europe, remain sparse due to the limited availability of appropriate micro level data. This paper provides a comparative analysis of life satisfaction between Roma and non‐Roma young adults aged between 15 and 24 years using survey data collected from Serbia in 2010 and from Bosnia and Herzegovina in 2011. Results from raw answers show that the young Roma population living in settlements is less satisfied with life than non‐Roma. However, we find instead that the former group is more satisfied once we account for the fact that Roma have more disadvantaged characteristics on average. Also, Roma young adults expect a better life within one year compared to the non‐Roma in Serbia while there is no difference in Bosnia and Herzegovina.