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The Effect of Income and Wealth on Subjective Well-Being in the Context of Different Welfare State Regimes

Abstract

In this article, we study the causal effects of two economic standing measures on the subjective well-being of the elderly, as well as the moderating effects of distinct welfare regimes on these relationships. For our analysis, we classify countries into the following welfare regimes: Conservative, Social-democratic, Mediterranean, and Post-socialist. We address the income endogeneity issue by utilizing the panel structure of our data and instrumenting for income. Our findings show that the significance and strength of the effects of both economic standing measures on life satisfaction are moderated by the institutional context or welfare regime type, which we support by providing several robustness checks. Finally, we make a deeper inquiry into the heterogeneity of the countries classified. After controlling for endogeneity, our results indicate that the relationship between economic standing and life satisfaction is mostly driven by individual countries, which suggests caution when studying the effect of economic standing on subjective well-being.

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Notes

  1. The question in the survey was: “On a scale from 0 to 10, where 0 means completely dissatisfied and 10 means completely satisfied, how satisfied are you with your life?”

  2. A fairly comprehensive overview is given in Ed Diener’s collected works, which encompasses many of his papers (Diener 2009).

  3. A meta-analysis on the relationship between health and subjective well-being was conducted already in 1984 by Okun, Stock, Haring, and Witter.

  4. The descriptive statistics for the four subsamples are provided in “Appendix”.

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Correspondence to Miroslav Verbič.

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Appendix

Appendix

See Tables 9 and 10.

Table 9 Descriptive statistics for individual countries in the sample
Table 10 OLS, FE and IVFE estimates of the effect of economic standing on life satisfaction in different welfare regime types—robustness checks

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Dominko, M., Verbič, M. The Effect of Income and Wealth on Subjective Well-Being in the Context of Different Welfare State Regimes. J Happiness Stud 22, 181–206 (2021). https://doi.org/10.1007/s10902-020-00225-9

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Keywords

  • Subjective well-being
  • Life satisfaction
  • Income
  • Wealth
  • Instrumental variable estimation
  • Welfare

JEL Classification

  • D31
  • I31
  • I38