“…The importance of adaptation to income and other life events has been tested with subjective measures since the early 1970s mostly by psychologists (for an exception, see Van Praag 1976 andVan Praag 1985). The most famous study in this arena is by Brickman et al (1978) who compare a group of 22 lottery winners with another 22 non-winners (control group) who were living in the same geographical area.…”
There is enough evidence to be confident that individuals are able and willing to provide a meaningful answer when asked to value on a finite scale their satisfaction with their own lives, a question that psychologists have long and often posed to respondents of large questionnaires. Without taking its limitations and criticisms too lightly, some economists have been using this measure of self-reported satisfaction as a proxy for utility so as to contribute to a better understanding of individuals' tastes and hopefully behavior. By means of satisfaction questions we can elicit information on individual likes and dislikes over a large set of relevant issues, such as income, working status and job amenities, the risk of becoming unemployed, inflation, and health status. This information can be used to evaluate existing ideas from a new perspective, understand individual behavior, evaluate and design public policies, study poverty and inequality, and develop a preference based valuation method. In this article I first critically assess the pros and cons of using satisfaction variables, and then discuss its main applications.
“…The importance of adaptation to income and other life events has been tested with subjective measures since the early 1970s mostly by psychologists (for an exception, see Van Praag 1976 andVan Praag 1985). The most famous study in this arena is by Brickman et al (1978) who compare a group of 22 lottery winners with another 22 non-winners (control group) who were living in the same geographical area.…”
There is enough evidence to be confident that individuals are able and willing to provide a meaningful answer when asked to value on a finite scale their satisfaction with their own lives, a question that psychologists have long and often posed to respondents of large questionnaires. Without taking its limitations and criticisms too lightly, some economists have been using this measure of self-reported satisfaction as a proxy for utility so as to contribute to a better understanding of individuals' tastes and hopefully behavior. By means of satisfaction questions we can elicit information on individual likes and dislikes over a large set of relevant issues, such as income, working status and job amenities, the risk of becoming unemployed, inflation, and health status. This information can be used to evaluate existing ideas from a new perspective, understand individual behavior, evaluate and design public policies, study poverty and inequality, and develop a preference based valuation method. In this article I first critically assess the pros and cons of using satisfaction variables, and then discuss its main applications.
“…There are other approaches to constructing monetary poverty lines, such as the regression approach proposed in Paul (1989) and a subjective approach based on the value judgments of people, as in Praag (1968). The former approach requires a lot more data than are usually available in sample surveys, whereas the latter approach involves subjective elements of individuals.…”
The paper examines changes in the extent of poverty in Iran in the period 1983 to 1993. More specifically, it investigates the contributions of growth and redistribution factors to changes in poverty over this period of ten years. The analysis is based on household-level data relating to three Household Income and Expenditures Surveys of 1983Surveys of , 1988Surveys of , and 1993. The study reveals that the extent of poverty in the rural sector declined slightly, whereas in the urban sector it increased significantly. Decomposition of changes in poverty into growth and redistribution components indicates that in each sector the redistribution component was positive, implying that the deterioration of income inequality contributed to the worsening of poverty. The growth component, however, affected the two sectors differently: it contributed to a reduction in poverty in rural areas and an increase in urban areas.
“…It has been found by several authors [7,13,15,17,[19][20][21][22]26] that satisfaction with life or with one's financial situation depends not only on own income y n but on the average income of the reference group of n, say y n,ref , as well. For instance, (3.1) carries over into…”
Section: Personal Subjective Inequality As Felt By Individuals Withinmentioning
In this paper it is argued that subjective well-being (SWB) of the individual depends on two types of variables. The first type consists of characteristics of the individual himself, such as age, health, income, etc. The second type of variables consists of the characteristics of the individuals belonging to his reference group. The vast literature about happiness, quality of life, and well-being informs us extensively about the effects of objective variables. How the second type affects well-being is much less investigated. It is argued that the concept of well-being inequality cannot be properly defined without taking the referencing process into account. The reference effect depends on how frequently individuals compare with others and on the degree of social transparency in society. We attempt to give a structural embedding of the idea of reference groups in SWB-models. In this paper we employ the reference-extended model for incorporating in happiness studies the concept of inequality in happiness or SWB. Finally, we plead for an extension of the present happiness paradigm by setting up a new additional agenda for empirical research in order to get quantified knowledge about the referencing process. As a first step we suggest a new question module to be included in new survey questionnaires.
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