NEW DELHI, India, February 19 (IPS) – Subjective wellbeing and income are closely related.
This article examines the relationships between subjective well-being, narrowly defined to focus on economic well-being in India, and income variants, based on the only panel survey in India Human Development Survey (IHDS).
As to whether the rich are happier with their lives is often taken for granted, although surveys like the Gallup World Poll show that the relationship between subjective well-being and income is often weak, except in low-income countries in Africa and South Asia.
For example, researcher Daniel Kahneman and his colleagues report that the correlation between household income and reported life satisfaction or happiness with life is typically between 0.15 and 0.30. There are several plausible reasons.
First, income growth has a primarily temporary impact on reported life satisfaction as it adapts to material goods.
Second, it is relative income, not income level, that affects well-being – more or less than others earn more than what one earns.
Third, although average life satisfaction in low-income countries tends to increase with GDP per capita, life satisfaction hardly increases once GDP per capita exceeds USD 10,000 (purchasing power parity).
This article explores the relationships between subjective well-being, narrowly defined to focus on economic well-being in India, and income variants, based on the only panel survey in India Human Development Survey (IHDS).
Why do we need a new measure of wellbeing when there is already a widespread, objective measure of wellbeing based on per capita income? There are several reasons.
The first arises from the distinction between decision benefit and experienced benefit. In the standard approach to measuring wellbeing, ordinal preferences are derived from observations of decisions supposedly made by rational (utility maximizing) agents. The derived object is the decision program.
In contrast, recent advances in psychology, sociology, behavioral economics, and happiness economics suggest that the usefulness of choices is unlikely to illuminate the usefulness of different experiences – hence the emphasis is on actions that are more directly focused on the experienced benefit, in particular responses to subjective wellbeing (SWB).
We rely on the two rounds of IHDS for 2005 and 2012. An important feature of IHDS is that it collected data on the SWB. The question was: Would you say that your household is economically the same today as it was seven years ago, better or worse?
So the focus of this SWB is narrow. However, because it is self-reporting, it means a broader view that is influenced by several factors other than income, wealth, and employment like age, health, caste, etc.
There is a positive relationship between the SWB and per capita expenditure (a proxy for per capita income that is often underestimated and underestimated): the higher the expenditure in 2005, the higher the SWB was in 2012.
The temporal priority of the expenditures precludes a reverse causation of high SWB to high expenditures, i.e. H. Greater wellbeing could also be associated with better performance, leading to higher spending.
High expenditure is associated with a decent standard of living, a good schooling for children and financial security. Since India’s comparable GDP per capita (PPP) was $ 2,270 in 2003, well below the $ 10,000 threshold, this is consistent with the evidence available.
Aspirations and achievements
To measure the aspiration-achievement gap, we analyzed the relationship between SWB and the ratio of a household’s per capita expenditure to the highest per capita expenditure in the primary sampling unit.
Although this is a rough approximation of the relative deprivation, we get a negative relationship between the SWB and this ratio. In other words, the larger the gap, the greater the feeling of resentment and frustration, and the lower the SWB.
The greater the proportional increase in per capita expenditure between 2005 and 2012, the greater the SWB. To illustrate this, in 2005 we construct three spending areas: the first for the extremely poor, the second for the middle class, and the third for the rich.
When the proportional increase in per capita expenditure is highest among the extreme poor and lowest among the rich, the SGR of the extreme poor is higher. Indeed it is.
This provides important policy lessons.
For one, in a lower-middle-income country like India, the growth in expenditure or income is significant. However, the widening of the gap between aspirations and successes or between the highest expenditure / income of a reference group and the actual expenditure / income of a household reflects resentment, frustration and the loss of subjective well-being.
Taxing the rich and allowing the extremely poor to benefit more from economic opportunities can improve well-being.
In summary, it can be said that objective welfare and subjective wellbeing measures are far more useful together than both alone.
Veena S. Kulkarni teaches sociology at Arkansas State University and is a co-author of this article. Raghav Gaiha is a Research Affiliate at the University of Pennsylvania Population Studies Center and Vani S. Kulkarni teaches sociology at the University of Pennsylvania
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