Skip to main content

Advertisement

SpringerLink
Log in

Reference Groups and Pensioners’ Subjective Economic Well-Being in Europe

  • Published:
Social Indicators Research Aims and scope Submit manuscript

Abstract

This study contributes to the interdisciplinary debate over the effects of absolute and relative income on subjective well-being by introducing country-level measures of income into the analysis of pensioners’ economic well-being. Both the relevance of alternative reference groups for different phases of old age, measured through median incomes, and the effect of general income inequality within countries are explored. Analyses are based on the cross-sectional components of the survey European Union Statistics on Income and Living Conditions from 2005 to 2011, containing information on 458,769 pensioners from 31 European countries. With the multilevel linear regression analysis method, the effects of different income measures are analyzed both at the individual and country levels. The main result shows that the average income level of pensioners within countries hold spillover effects strong enough to conclude other pensioners constitute a relevant reference point. Pensioners’ high income level decreases individual income adequacy regardless of age. Results also indicated the labour market group having varying effects on different age groups. The general income inequality does not affect pensioners’ subjective economic well-being.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Notes

  1. Separated from working full-time 2009 onwards.

  2. 0.80 % of the health and 3.5 % of the education information is missing.

  3. Before calculating the indicator, all households with negative incomes or incomes less than one euro were excluded. Income is coded top-to-bottom by applying the mean of equivalised household income to the lowest percentage of income distribution, and top-coded by applying ten times the unequivalised mean at the top of the annual distribution by country. The Gini coefficient counted for this study and indicators counted by Eurostat are not identical.

  4. The household structure is taken into account by applying the modified OECD equivalence scale, which is the official equivalence scale applied to EU-SILC by Eurostat. The first adult is assigned the weight of 1.0, the second and each subsequent person aged 14 and over the weight of 0.5, and each child under 14 the weight of 0.3. Equivalised income is attributed equally to each member of the household.

References

  • Atkinson, A. B., Marlier, E., & Wolff, P. (2010). Beyond GDP, measuring well-being and EU-SILC. In A. B. Atkinson, E. Marlier, & P. Wolff (Eds.), Income and living conditions in Europe., Eurostat statistical books Luxembourg: Publications Office of the European Union.

    Google Scholar 

  • Bartolini, S., Bilancini, E., & Sarracino, F. (2013). Predicting the trend of well-being in Germany: How much do comparisons, adaptation and sociability matter? Social Indicators Research, 114(2), 169–191.

    Article  Google Scholar 

  • Berthoud, R. (2012). Calibrating a cross-European poverty line. ISER Working Paper Series 2.

  • Caporale, G. M., Georgellis, Y., Tsitsianis, N., & Yin, Y. P. (2009). Income and happiness across Europe: Do reference values matter? Journal of Economic Psychology, 30, 42–51.

    Article  Google Scholar 

  • Cracolici, M. F., Giambona, F., & Cuffaro, M. (2012). The determinants of subjective economic well-being: An analysis on Italian-Silc Data. Applied Research Quality Life, 7, 17–47.

    Article  Google Scholar 

  • Cutler, N. E., Gregg, D. W., & Lawton, M. P. (Eds.). (1992). Aging, money, and life satisfaction. Aspects of financial gerontology. New York: Springer.

    Google Scholar 

  • De Santis, G., Seghieri, C., & Tanturri, M. L. (2005). Old age with and without children: economic implications in Italy. In: Paper in European Population Conference, Liverpool, UK. http://epc2006.princeton.edu/papers/60235.

  • Diener, E., Eunkook, M. S., Richard, E. L., & Smith, H. L. (1999). Subjective well-being: Three decades of progress. Psychological Bulletin, 125(2), 276–302.

    Article  Google Scholar 

  • Easterlin, R. A. (1974). Does economic growth improve the human lot? Some empirical evidence. In P. A. David & M. W. Reder (Eds.), Nations and households in economic growth: Essays in honor of Moses Abramovitz. New York: Academic Press.

    Google Scholar 

  • Easterlin, R. A. (2005). Feeding the illusion of growth and happiness: A reply to Hagerty and Veenhoven. Social Indicators Research, 74(3), 429–443.

    Article  Google Scholar 

  • Easterlin, R. A., McVey, L. A., Switek, M., Sawangfa, O., & Smith Zweig, J. (2011). The happiness-Income paradox revisited. IZA discussion paper No. 5799.

  • EU. (2012). Pension adequacy in the European Union 2010 − 2050. Report prepared jointly by the directorate-general for employment, social affairs and inclusion of the European Commission and the social protection committee. doi:10.2767/77325.

  • Eurostat. (2014). Database of income and living conditions/monetary poverty for elderly people. http://epp.eurostat.ec.europa.eu/portal/page/portal/income_social_inclusion_living_conditions/data/database.

  • Eurostat. (2015). The EU-Statistics on Income and Living Conditions (EU-SILC). http://ec.europa.eu/eurostat/web/income-and-living-conditions/overview.

  • Ferrer-i-Carbonell, A. (2005). Income and well-being: An empirical analysis of the comparison income effect. Journal of Public Economics, 89, 997–1019.

    Article  Google Scholar 

  • Festinger, L. (1954). A theory of social comparison processes. Human Relations, 7(2), 117–140.

    Article  Google Scholar 

  • George, L. K. (1992). Economic status and subjective well-being: A review of the literature and an agenda for future research. In N. E. Cutler, D. W. Gregg, & M. P. Lawton (Eds.), Ageing, money, and life satisfaction: Aspects of financial gerontology. New York: Springer.

    Google Scholar 

  • Gori-Maia, A. (2013). Relative income, inequality and subjective wellbeing: Evidence for Brazil. Social Indicators Research, 113(3), 1193–1204.

    Article  Google Scholar 

  • Hagerty, M. R., & Veenhooven, R. (2003). Wealth and happiness revisited: Growing wealth of nations does go with greater happiness. Social Indicators Research, 64(1), 1–27.

    Article  Google Scholar 

  • Hansen, T., Slagsvold, B., & Moum, T. (2008). Financial satisfaction in old age: A satisfaction paradox or a result of accumulated wealth? Social Indicators Research, 89(2), 323–347.

    Article  Google Scholar 

  • Hazelrigg, L. E., & Hardy, M. A. (1997). Perceived income adequacy among older adults: Issues of conceptualization and measurement, with an analysis of data. Research on Aging, 19(1), 69–107.

    Article  Google Scholar 

  • Heckhausen, J., & Brim, O. G. (1997). Perceived problems for self and others: Self-protection by social downgrading throughout adulthood. Psychology and Ageing, 12(4), 610–619.

    Article  Google Scholar 

  • Helliwell, J. F. (2003). How’s life? Combining individual and national variables to explain subjective well-being. Economic Modeling, 20, 331–360.

    Article  Google Scholar 

  • Hsieh, C.-M. (2003). Income, age and financial satisfaction. International Journal of Aging and Human Development, 56(2), 89–112.

    Article  Google Scholar 

  • Kautto, M., Palomäki, L.-M., Rantala, J., & Tuominen, E. (2009). Eläkeläisten tulot ja kokemukset toimeentulosta. Yhteiskuntapolitiikka, 74(3), 290–302.

    Google Scholar 

  • Layard, R., Mayraz, G., & Nickell, S. (2010). Does relative income matter? Are the critics right? In E. Diener, J. F. Helliwell, & D. Kahneman (Eds.), International differences in well-being. New York: Oxford University Press.

    Google Scholar 

  • Liang, J., & Fairchild, T. J. (1979). Relative deprivation and perception of financial adequacy among the aged. Journal of Gerontology, 34(5), 746–759.

    Article  Google Scholar 

  • Liang, J., Kahana, E., & Doherty, E. (1980). Financial well-being among the aged: A further elaboration. Journal of Gerontology, 35(3), 409–420.

    Article  Google Scholar 

  • LIS. (2011). http://www.lisdatacenter.org/wp-content/uploads/2011/03/C3-3-7-2-self-teaching-stata.pdf.

  • Litwin, H., & Sapir, E. V. (2009). Perceived income adequacy among older adults in 12 countries: Findings from the survey of health, ageing, and retirement in Europe. The Gerontologist, 49(3), 397–406.

    Article  Google Scholar 

  • Mood, Carina. (2010). Logistic regression: Why we cannot do what we think we can do, and what we can do about it. European Sociological Review, 26(1), 67–82.

    Article  Google Scholar 

  • Rabe-Hesketh, S., & Skrondal, A. (2012). Multilevel and longitudinal modeling using stata. Volume I: Countinuous responses (3rd ed.). Texas: Stata Press.

    Google Scholar 

  • Rözer, J., & Kraaykamp, G. (2013). Income inequality and subjective well-being: A cross-national study on the conditional effects of individual and national characteristics. Social Indicators Research, 113(3), 1009–1023.

    Article  Google Scholar 

  • Stevenson, B. & Wolfers, J. (2008). Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox. NBER Working Paper No. 14282.

  • Stoller, M. A., & Stoller, E. P. (2003). Perceived income adequacy among elderly retirees. Journal of Applied Gerontology, 22(2), 230–251.

    Article  Google Scholar 

  • Veenhooven, R. (1991). Is happiness relative? Social Indicators Research, 24(1), 1–34.

    Article  Google Scholar 

  • Veenhooven, R., & Hagerty, M. (2006). Rising happiness in nations 1946–2004. A reply to Easterlin. Social Indicators Research, 79(3), 421–436.

    Article  Google Scholar 

  • Veenhoven, R., & Vergunst, F. (2013). The Easterlin illusion: Economic growth does go with greater happiness. EHERO working paper 1.

  • Verme, P. (2011). Life satisfaction and income inequality. Review of Income and Wealth, 57(1), 111–137.

    Article  Google Scholar 

  • Weidekamp-Maicher, M., & Naegele, G. (2007). Economic resources and subjective well-being in old age. In H. Mollenkopf & A. Walker (Eds.), Quality of life in old age. International and multi-disciplinary perspectives., Social Indicators Research Series 31 Dordrecht: Springer.

    Google Scholar 

  • Wilkinson, R., & Pickett, K. (2010). The spirit level. Why equality is better for everyone. London: Penguin Books.

    Google Scholar 

  • Zagorski, K., Evans, M. D. R., Kelley, J., & Piotrowska, K. (2014). Does national income inequality affect individuals’ quality of life in Europe? Inequality, happiness, finances, and health. Social Indicators Research, 117(3), 1089–1110.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Research Department, Finnish Centre for Pensions, 00520, Helsinki, Finland

    Liisa-Maria Palomäki

Authors
  1. Liisa-Maria Palomäki
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Liisa-Maria Palomäki.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Palomäki, LM. Reference Groups and Pensioners’ Subjective Economic Well-Being in Europe. Soc Indic Res 131, 509–525 (2017). https://doi.org/10.1007/s11205-016-1262-0

Download citation

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11205-016-1262-0

Keywords

Search

Navigation