Poverty is a Public Bad: Panel Evidence From Subjective Well‐Being Data

Previous research has found that subjective well‐being (SWB) is lower for individuals classified as being in poverty. We extend the poverty‐SWB literature by focusing on aggregate poverty. Using panel data for 39,239 individuals living in Germany from 2005–2013, we show that people's SWB is negatively correlated with the regional (state‐level) poverty ratio while controlling for individual poverty status and poverty intensity. This suggests that poverty is a public bad. The negative relationship between aggregate poverty and SWB is more salient in the upper segments of the income distribution and is robust to controlling for the rate of unemployment and per capita GDP. The character of poverty as a public bad suggests that poverty alleviation is a matter not only of distributive justice, but of allocative efficiency.     

Measurement of Quality of Life and Well‐Being in France: The Drivers of Subjective Well‐Being

Ever since the publication of the Stiglitz Report, France has been heavily involved in the measurement of well‐being. The French Statistical Institute (INSEE) has expanded the scope of its existing surveys. It has also launched an innovative experimental survey which, drawing upon a single statistical source, aims for the first time to explore the different dimensions of both objective and subjective quality of life, as highlighted in the Stiglitz Report. It allows us to study, at the individual level, correlations between these dimensions and the accumulation of deprivations. It has enabled us to better understand the links between determinants generally referred to as objective dimensions of quality of life (such as health or education) and subjective well‐being. This information is of paramount importance for policy makers who cannot act directly on the level of people's satisfaction but can only act upon the levers of objective dimensions. This paper presents the main findings of the experimental survey.     

Measuring National Well‐Being: A UK Perspective

The Measuring National Well‐being program began in the UK in November 2010. Traditional measures of progress such as GDP have long been recognized as an incomplete picture of the state of the nation. Following a six‐month National Debate that elicited 34,000 responses, ONS developed a framework for measuring national well‐being consisting of 10 domains and 40 headline indicators. The indicators include a mixture of both subjective and objective measures. Through supplementing existing economic measures, such as GDP, with measures that reflect social and environmental well‐being, national well‐being looks at the state of the nation through a broader lens. The paper will describe the development of the framework of indicators, including developing subjective well‐being measures, and the dissemination of this information using a range of interactive tools developed for this purpose. This is a long term development program and is still in its early days of measurement. How these data are used to improve policy design, delivery, and evaluation will be important to assess the success of the program. In particular, having a more complete picture of national well‐being will lead to a better understanding of policy impacts on well‐being; better allocation of resources; more informed decisions; assessment of government performance; and international comparisons.     

Income or Consumption: Which Better Predicts Subjective Well‐Being?

The positive relationship between income and subjective well‐being has been well documented. However, work assessing the relationship of alternative material well‐being metrics to subjective well‐being (SWB) is limited. Consistent with the permanent income hypothesis, we find that a consumption‐based measure out‐performs (surveyed) income in predicting subjective well‐being. When objective measures of consumption are combined with self‐assessments of a household’s standard of living, income becomes insignificant altogether. We obtain our result utilizing household‐level data from Statistics New Zealand’s New Zealand General Social Survey which contains measures of income, SWB and a measure of material well‐being called the Economic Living Standard Index that combines measures of consumption flows and self‐assessments of material well‐being.     

Local Segregation and Well‐Being

This paper deals with the quantification of the well‐being loss/gain of a demographic group associated with its occupational segregation, an issue that has not been formally tackled in the literature. For this purpose, this paper proposes several properties to take into account when measuring this phenomenon. Building on standard assumptions of social welfare functions, it also defines and characterizes a parameterized family of indices that satisfy those properties. In particular, the indices are equal to zero when either the group has no segregation or all occupations have the same wage, and the indices increase when individuals of the group move into occupations that have higher wages than those left behind. In addition, ceteris paribus, the indices increase more the lower the wage is of the occupation left behind, and consider small improvements for many people to be more important than large improvements for a few.     

Well‐Being,Deprivation, and the Great Recession in the U.S.: A Study in A Multidimensional Framework

We study changes in social well‐being and deprivation in the U.S. during the Great Recession and the subsequent recovery. We outline an analytical framework for measuring well‐being and deprivation in a multidimensional fashion when data on achievement in each dimension is assumed to be ordinal and binary in nature. We use data from the American Community Survey between 2008 and 2015 and find that there was a decline in social well‐being and a rise in social deprivation in the U.S. during the recession followed by a reversal of trends during the recovery. Despite low deprivation levels among the White population, this population experienced the largest increase in deprivation during the recession and the least decline in deprivation in the recovery period. These results underscore the fact that the impact of recession and the subsequent recovery varied significantly across population groups.     

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.     

Relative Income and Indebtedness: Evidence from Panel Data

We examine patterns of indebtedness in the Panel Study of Income Dynamics, focusing on the period surrounding the housing bubble and its aftermath (i.e., 1999–2009). Leverage increased across households, but most quickly among lower income households during this period. We find additionally that leverage grew faster for households with lower relative income compared to other households in similar demographic groups or within a state controlling for own income. Together, these findings provide evidence for the thesis that the rising indebtedness of households in the U.S. is related to high levels of inequality, and that “Veblen effects,” whereby relative income matters for individual well‐being and decisions, may contribute to rising household indebtedness.     

Subjective well‐being and political participation: Empirical evidence from Ghana

A large, extant literature examines the effect of political factors on individual subjective well‐being. These studies have treated political factors as a cause and subjective well‐being as an effect. A sparse but growing literature now advances the argument that subjective well‐being is a cause and voting or political participation an effect. In this paper we examine whether subjective well‐being influences voting and political participation in Ghana. Using data from Wave 6 of the World Values Survey in Ghana, we find that subjective well‐being influences neither voting nor protest behavior.     

Four Decades of the Economics of Happiness: Where Next?

There has been explosive growth in the analysis of subjective well‐being in Economics over the past 40 years. This article reviews some of this growth, and suggests a number of domains in which future research may proceed.     

Heroin Consumption,Prices and Addiction: Evidence from Self‐reported Panel Data*

Estimation models of drug demand should encompass the aspect of addiction. Here, we consider two static panel data regression models and two cross‐section models with lags or leads in drug consumption as additional regressors. Heroin injectors attending a needle exchange service in Oslo were interviewed twice, with a one‐year interval. Despite our relatively small sample, we obtain statistically significant price and income responses for nearly all of the models and specifications applied. The sample is split by dealing status, with dealers obtaining price elasticities in the range of [?0.15, ?1.51] and non‐dealers [?0.71, ?1.69]. Somewhat surprisingly, the estimates of the variance of the latent individual‐specific variable are rather low in the panel data models, although higher for non‐dealers than for dealers.     

Equality of Opportunity in Four Measures of Well‐Being

A growing literature has tried to measure the extent to which individuals have equal opportunities to acquire income. At the same time, policymakers have doubled down on efforts to go beyond income when designing policies to enhance well‐being. We attempt to bridge these two areas by measuring the extent to which individuals have equal opportunities to achieve a high level of well‐being. We use the German Socio‐Economic Panel to measure well‐being in four different ways, including incomes. This makes it possible to determine if the way in which well‐being is measured matters for identifying who the opportunity‐deprived are and for tracking inequality of opportunity over time. We find that, regardless of how well‐being is measured, the same people are opportunity‐deprived and equality of opportunity has improved over the past 10 years. This suggests that going beyond income has little relevance if the objective is to provide equal opportunities.     

Heterogeneity in the Relationship between Happiness and Age: Evidence from the German Socio‐Economic Panel

This paper studies the evolution of life satisfaction over the life course in Germany. It clarifies the causal interpretation of the econometric model by discussing the choice of control variables and the underidentification between age, cohort and time effects. The empirical part analyzes the distribution of life satisfaction over the life course at the aggregated, subgroup and individual level. To the findings: On average, life satisfaction is mildly decreasing up to age 55 followed by a hump shape with a maximum at 70. The analysis at the lower levels suggests that people differ in their life satisfaction trends, whereas the hump shape after age 55 is robust. No important differences between men and women are found. In contrast, education groups differ in their trends: highly educated people become happier over the life cycle, where life satisfaction decreases for less‐educated people.     

Income comparison and happiness: The role of fair income distribution

Relative income gap is one of the most popular approaches for explaining the income–happiness relationship. We argue in this article that when people compare their incomes, they care about distributional fairness more than relative income disparity. It is difficult for us to explain China's income–happiness paradox if we simply compare the income gap and do not explore the income‐generation process leading to income inequality. We therefore employ an approach based on a responsibility‐sensitive theory of justice that decomposes individual income into fair and unfair components. As a proxy for distributional unfairness, unfair income is considered the main source of unhappiness. Using data from the Chinese Household Income Project survey, we find strong support for the negative relationship between income unfairness and happiness. We also find a significantly positive relationship between the relative income gap and income unfairness, which leads us to consider the income comparison hypothesis as the explanation for the income–happiness paradox in a new light. Sensitivity analyses confirm the robustness of our results.     

Is perceived financial inadequacy persistent?

In an attempt to understand the determinants of financial inadequacy, this paper employs the ability of households to make ends meet as a measure of their perceived financial inadequacy. Using household‐level data from the European Community Household Panel covering eight countries over the period from 1994 to 2001, this study applies a dynamic probit model that incorporates both state dependency and individual fixed effects. Exploiting a latterly enhanced bias‐corrected fixed‐effects probit model, I address the persistent nature of subjective financial inadequacy by directly estimating fixed effects while correcting for incidental parameters and avoiding the initial conditions problem of dynamic models. The results reveal that employing time‐invariant individual effects to model subjective monetary perception is essential. However, by controlling for household heterogeneity, income, indebtedness, and health status, I find that in addition to the major differences across European households, country‐specific factors can have adverse effects on the persistent nature of perceived financial inadequacy.     

TRENDS IN AMERICAN LIVING STANDARDS AND INEQUALITY, 1959–2007

We analyze the trends from 1959 to 2007 using an expanded measure of income called the Levy Institute Measure of Economic Well‐Being (LIMEW). LIMEW is different in scope from the official U.S. Census Bureau measure of gross money income (MI) in that our measure includes non‐cash transfers, public consumption, imputed income from wealth, and household production and nets out personal taxes. While the annual growth rates of median LIMEW and MI are very close over the whole period (0.67 and 0.63 percent), median LIMEW grew much faster than median MI after 1982 and much slower before. The Gini coefficient of MI is uniformly higher than that of LIMEW but both show about the same change from 1959 to 2007. Decomposition analysis shows that changes in inequality are driven to a large extent by non‐home wealth in LIMEW and earnings in MI. While the racial gap in MI declined somewhat over the 1990s and 2000s, the racial gap in LIMEW actually widened a bit. Over the same years, while there was little change in the gap in MI between the elderly and non‐elderly, the LIMEW of the elderly actually overtook that of the non‐elderly.     

The OECD Better Life Initiative: How's Life? and the Measurement of Well‐Being

This paper presents the framework used by the OECD for defining and measuring well‐being, developed as part of the OECD Better Life Initiative launched in 2011. This framework measures well‐being by considering 11 dimensions covering both current material conditions and quality of life, while also recognizing the importance of taking account the sustainability of well‐being in the future. This framework has been populated with indicators for each dimension, whose selection has relied on international standards on measurement and was made in consultation with experts and National Statistical Offices of OECD countries. The paper also discusses the pros and cons of various approaches for presenting and disseminating information on multidimensional well‐being to different audiences—including the OECD Better Life Index, an interactive web tool. The paper concludes by illustrating the progress made in developing measures of well‐being and outlines the statistical agenda ahead to improve existing indicators and develop new ones.     

SOCIAL COMPARISON AND SUBJECTIVE WELL‐BEING: DOES THE HEALTH OF OTHERS MATTER?

The importance of social comparison in shaping individual utility has been widely documented by subjective well‐being literature. So far, income and unemployment have been the main dimensions considered in social comparison. This paper aims to investigate whether subjective well‐being is influenced by inter‐personal comparison with respect to health. Thus, we study the effects of the health of others and relative health hypotheses on two measures of subjective well‐being: happiness and subjective health. Using data from the Italian Health Conditions survey, we show that a high incidence of chronic conditions and disability among reference groups negatively affects both happiness and subjective health. Such effects are stronger among people in the same condition. These results, robust to different econometric specifications and estimation techniques, suggest the presence of some sympathy in individual preferences with respect to health and reveal that other people's health status serves as a benchmark to assess one's own health condition.     

The Pro‐Poorness,Growth and Inequality Nexus: Some Findings From a Simulation Study

An income growth pattern is pro‐poor if it reduces a (chosen) measure of poverty by more than if all incomes were growing equiproportionately. Inequality reduction is not sufficient for pro‐poorness. In this paper, we explore the nexus between pro‐poorness, growth, and inequality in some detail using simulations involving the displaced lognormal, Singh–Maddala, and Dagum distributions. For empirically relevant parameter estimates, distributional change preserving the functional form of each of these three‐parameter distributions is often either pro‐poor and inequality reducing, or pro‐rich and inequality exacerbating, but it is also possible for pro‐rich growth to be inequality reducing. There is some capacity for each of these distributions to show trickle effects (weak pro‐richness) along with inequality‐reducing growth, but virtually no possibility of pro‐poorness for growth which increases overall inequality. Implications are considered.     

Earnings Dynamics and Profile Heterogeneity: Estimates from Japanese Panel Data

The recent empirical work on earnings processes using US panel data finds that ignoring heterogeneity in earnings profiles among individuals leads to an upward bias in the autoregressive parameter of earnings shocks. It then argues that the existing assumptions in incomplete markets and heterogeneous‐agent models, almost all of which require highly persistent earnings shocks and no individual‐specific and group‐specific differences in earnings growth rates, may be inappropriate. This paper investigates the applicability of this US data‐based debate to other developed countries by using a panel of Japanese male earnings. The results indicate that it is possible to corroborate the recent US arguments, despite some differences in the estimates.