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Family Economic Well-Being, and (Class) Relative Wealth: An Empirical Analysis of Life Satisfaction of Secondary School Students in Three Italian Cities

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Abstract

The aim of the study is to shed light on an under-investigated topic—the determinants of life satisfaction of the young—by means of an econometric analysis which focuses specifically on the relationship between household wealth and life satisfaction of secondary school students living in three Italian cities: Rome, Milan and Genoa. We find that family home ownership, mortgages and (class) relative wealth significantly affect the life satisfaction of students. Other significant controls are geographical residence (those living in Milan are significantly less satisfied with life), the mother’s occupation, and trust in family and friendships. The characteristics of our household wealth variables make it hard to conceive any inverse causality (and endogeneity highly unlikely), thus suggesting a direct causality nexus for these factors. We explain why our research provides important insights that should be taken into account when developing policies to promote the subjective well-being of the young.

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Notes

  1. http://algarvedailynews.com/news/3411-uk-happiness-assessment-in-hand accessed on 27 July 2011.

  2. We use the word “money” here and below for simplicity and when we refer to the debate in the literature. Our variables (mortgages and home ownership) are actually proxies for household economic well-being which are related to household monetary balances (that is, mortgage payments reduce them, while home ownership increases them because rental payments are avoided).

  3. As will be shown below, we check whether this specific result persists when we remove students with parents working in the banking sector from the sample (see Sect. 6).

  4. Subjective well-being is traditionally measured in different ways in the literature. The life satisfaction indicator implies a cognitive approach, where evaluation of subjective well-being requires reflective judgment on one’s own life. Two alternative approaches are the affective approach, which refers to memories of pleasant or unpleasant affects experienced (that is, asking how many times the individual has felt angry or depressed in the past), and the eudaimonic approach, where individuals are asked whether they believe their life makes sense (Argyle 1987; Diener and Seligman 2004).

  5. For a survey of the life satisfaction literature see, among others, Frey and Stutzer (2002, 2010) and Clark et al. (2008; Clark 2008b).

  6. The research project is a randomized experiment on the effects of financial education, with institutional support from the Ministry of Education and financial support from primary Italian and international bank foundations (Unicredit, Fondazione Cariplo, Fondazione Carige, and the JP Morgan Foundation). We start from a sample of schools stratified at city level, based on income and school type. Unfortunately, some schools refused to participate. When a school accept, all students from a given class have to participate in the experiment. We therefore have only some “participation” bias at a school level. This problem is resolved by controlling for school, class, and type of school dummies in our econometric estimates.

  7. The Liceo Classico has been historically regarded as the most prestigious type of high school in Italy. The main subjects taught are humanities (Latin, Greek, Italian, and Philosophy), but the curriculum also includes Mathematics, Physics, Chemistry, and Biology. The Liceo Scientifico is the most important alternative to the Liceo Classico, and is oriented toward scientific disciplines. The Istituto Professionale is a technical and professional school with a curriculum including accounting and basic economic principles together with Italian, Mathematics, and Principles of Law.

  8. Unfortunately, as also happens with other surveys, the question about household income has almost all its variables missing. In some cases, missing values are due to an unwillingness to disclose confidential data, but in many other cases students were unable to calculate their household income with any precision. This why we rely on the variables indicated above (home ownership and mortgage) to measure household and student economic conditions.

  9. According to data from the Agenzia del Territorio (2011), 79.1 % of households in Italy were homeowners in 2009.

  10. Associated Press, "Students Protest as Italian Senate Passes Reforms"… ABC News, 29 October 2008.

  11. We control for age with this variable, since the sample contained all students aged between 17 and 18 (the regular age for a fourth-year student attending the class for the first time), except for an over-18 group who repeated at least 1 year during their school career.

  12. The goodness of fit test consists in regressing on the dependent variable (y) the predicted dependent variable from the given specification in levels and squares with the following specification \(y = \alpha_{0} + \alpha_{1} \widehat{y} + \alpha_{2} \widehat{y}^{2}\). Goodness of fit is maximum when α1 = 1 and α2 = 0.

  13. Class and school effects were always jointly significant when they are added to the specifications. Tests on their joint significance are omitted for reasons of space, and are available on request.

  14. Even though it is generally said that there are significant geographical differences in the severity of teachers in Italy, average grades are extremely similar across the three cities in our sample, with the differences being below 0.2, and definitely not statistically significant. The evidence for this is omitted for reasons of space, and is available on request.

  15. The occupation dummies considered are artisan, barman/waiter, house husband, shopkeeper, shop assistant, civil servant, manager, journalist, office clerk, businessman, teacher, freelance, manual worker, bank clerk, retired, medical practitioner, sales representative, and unemployed, plus a residual category for all other conditions.

  16. The urban area of Genoa is a tiny strip of land covered by hills which stretch down to the sea. The sea may therefore mitigate the climate, and the landscape also contributes directly to the happiness of its citizens. Rome is also well known for its mild climate.

  17. The idea is that the quality of relationships among classmates (and between classmates and teachers) may create a positive or negative atmosphere, thereby affecting student life satisfaction. The importance of social relationships for life satisfaction of young people is confirmed, among others, by Pichler (2006).

  18. Schwarz and Clore (1983) demonstrate that atmospheric conditions are a main factor among those relating to the interview circumstances which tend to affect respondent life satisfaction evaluation.

  19. We calculated the marginal effect of a change in a regressor on the probability of declaring the highest level of satisfaction in the ordered probit estimate with the standard formula

    \(\Updelta \Pr (Lsat = 10) = F(S + \Updelta S - c) - F(S - c)\) where F is the cumulative normal distribution, S the predicted average satisfaction level, ∆S the change of S whose impact on the left hand side variable has to be calculated, and c the highest cutpoint.

  20. The aim of the vignette approach is to solve the problem of interpersonal comparability of self-assessment (in our case life satisfaction) responses (see Corrado and Weeks 2010). The method identifies an interpersonally comparable scale by asking respondents to evaluate the same additional “anchoring vignette question” using response categories as in the standard life satisfaction question (King and Wand 2007). Differences in evaluation of the common anchoring vignette question are then used to tune the scales of the standard life satisfaction question. To clarify by using an example, Danes usually have very high average life satisfaction levels. If, however, they report average higher life satisfaction values when evaluating the common vignette question with respect to respondents of another nationality (who reported a lower average life satisfaction level for their own case), their apparently superior life satisfaction is in part due to their tendency to inflate life satisfaction evaluations, and answers on their subjective well-being have to be considered to be upward biased.

  21. Since we want to capture a sensation affected by respondents’ level of optimism or pessimism, a vague statement on the banking situation (without specifying a given time period or indicator) is preferred to a precise question to which only a right or wrong answer would have been possible.

  22. Note also that the heterogeneity in answers to this variable is not accounted for either by geographical location or by a parent’s job in the banking industry, since the averages are extremely close for subgroups in different cities with or without parents working in the banking system.

  23. Finally, we check whether our findings are robust when considering the dependent variable as continuous. We therefore re-estimate all our previous specifications in Tables 2, 3, 4, 5, 6, 7 with ordinary least squares under this assumption. Previous significant findings are robust to this change. The results are omitted for reasons of space, and are available on request.

  24. Among the empirical findings documenting the positive nexus between relational goods and life satisfaction, see Becchetti et al. (2008) and Becchetti et al. (2012).

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Acknowledgments

We wish to thank Gianpaolo Barbetta, Stefano Caiazza, Stefano Cima, Decio Coviello, Jerry Dwyer, Iftekhar Hasan, Tullio Jappelli, James Lothian, Chiara Monticone, Francesco Nucci, Mario Padula, Paul Wachtel and all participants at the XIXth Tor Vergata Financial Conference for useful comments and suggestions. Managerial support from Marco Bracaglia and the Osservatorio sul Credito, institutional support from the Ministry of Education and financial support from Unicredit, Fondazione Cariplo and Fondazione Carige are gratefully acknowledged.

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  1. Dipartimento di Economia e Istituzioni, Facoltà di Economia, Università di Roma Tor Vergata, Via Columbia 2, 00133, Rome, Italy

    Leonardo Becchetti & Fabio Pisani

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  1. Leonardo Becchetti
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  2. Fabio Pisani
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Correspondence to Leonardo Becchetti.

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Becchetti, L., Pisani, F. Family Economic Well-Being, and (Class) Relative Wealth: An Empirical Analysis of Life Satisfaction of Secondary School Students in Three Italian Cities. J Happiness Stud 15, 503–525 (2014). https://doi.org/10.1007/s10902-013-9433-z

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