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Deprivation and Subjective Well-Being: Evidence from Panel Data

Authors


  • Note: Maite Blázquez acknowledges the financial support provided by the Spanish Ministry of Education through grant ECO2008-04813 (Plan Nacional I+D+I, 2008–2011). We thank seminar participants at the IWAEE, Singapore Economic Review and Simposio de la Asociación Española de Economía held in 2011. Santiago Budría acknowledges the financial support provided by the Spanish Ministry of Education through grant ECO2008-04321 and by the Junta de Andalucía through grant P07-SEJ-03261.

Abstract

This paper uses data from the 2000–08 waves of the German Socio-Economic Panel dataset (SOEP) to assess the impact of deprivation in various life domains upon individual well-being. Unobserved heterogeneity is controlled for by means of a random effects model extended to include a Mundlak term and explicit controls for the respondents' personality traits. The paper shows that people care about social comparison information in a number of domains, not just income. Using an equivalent income approach, the estimates suggest that a one standard deviation deterioration of the individual position in the income distribution is as important as a 33.5 percent decrease in own income. This monetary equivalent amounts to an income variation of between 25 and 43 percent when it comes to other deprivation domains, including durables, accommodation, health, and social relations. These results recommend that in the fight against deprivation more emphasis should be directed to these non-monetary relevant dimensions.

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