Heterogeneity in Reported Well‐Being: Evidence from Twelve European Countries

Abstract

Résumé:Dans cet article nous modélisons la relation entre le revenu et le bien-être déclaré à l'aide de techniques à effet aléatoire appliquées sur des données de panel issues de douze pays européens. Il n'est pas possible de distinguer empiriquement une hétérogénéité des fonctions d'utilité (transformation du revenu en utilité) et une hétérogénéité des fonctions d'expression (transformation de l'utilité en bien-êttre déclaré); néanmoins, nous montrons que l'on peut fermement rejeter l'hypothèse selon laquelle ses deux opérations sont menées de la même façon dans les douze pays étudiés. L'"effet marginal du revenu sur le bien-être" diffère en effet très significativement entre les quatre classes mises en évidence; ce qui laisse supposer des préférences pour la redistribution et des comportements très différents entre ces classes. Nos résultats nous amènent à penser qu'agréger sans précaution des données issues de populations et de pays différents peut s'avérer une pratique dangereuse. Abstract:This paper models the relationship between income and self-reported weel-being using random-effect techniques applied to panel data from twelve European countries. We cannot distinguish empirically between heterogeneities in the utility function (translating income into utility) and the expression function (turning utility into self-reported well-being), but we strongly reject the hypothesis that individuals carry out these joint transformations in same way. The "marginal well-being effect of income" is very different in the four classes we identify; thus we expect preferences for redistribution and behaviour to be different across these classes. Our results suggest that aggregating data across diverse populations, and countries, may be a dangerous practice. Mots clés :Revenu, utilité, bien-être, hétérogénéité, classes latentes.Key Words : Income, Utility, Well-being, Heterogeneity, Latent classes. Abstract This paper models the relationship between income and self-reported well-being using random-effect techniques applied to panel data from twelve European countries. We cannot distinguish empirically between heterogeneities in the utility function (translating income into utility) and the expression function (turning utility into self-reported well-being), but we strongly reject the hypothesis that individuals carry out these joint transformations in the same way. The "marginal well-being effect of income" is very different in the four classes we identify; we thus expect preferences for redistribution and behaviour to be different across these classes. Our results suggests that aggregating data across diverse populations, and countries, may be a dangerous practice.JEL Codes: C14, C23, I30.

Happiness functions with preference interdependence and heterogeneity: the case of altruism within the family

“…Notes 1 A related approach has been previously applied by Clark et al (2005) in the context of estimating the responses of well-being to income changes.…”

Subjective well-being in European countries—on the age-specific impact of physical activity

“…For instance, the impact of income on SWB is identified to be positive, though subject to some considerable discussion arising from the 'Easterlin paradox' [14], in which rising real incomes have not been correlated with rising levels of SWB over time. Yet, crosssectional studies identify a positive effect of income on SWB [4,37] as do panel data studies [8,16,17,21,41]. An explanation offered by Frey and Stutzer [19] is that it is relative income that ultimately affects SWB because of the relativity of individual's judgments.…”

The Effect of Income on General Life Satisfaction and Dissatisfaction

“…A recent example for such an approach is the study by Clark et al (2005) who used GLS data from the European Community Household Panel. They found that the effect of income changes were larger in the "latent satisfied" than in the "latent dissatisfied" classes.…”