IDEAS home Printed from https://ideas.repec.org/a/ipf/psejou/v44y2020i4p423-462.html
   My bibliography  Save this article

Does going beyond income make a difference? Income vs. equivalent income in the EU over 2007-2011

Author

Listed:
  • Marko Ledic

    (Faculty of Economics and Business, University of Zagreb, Zagreb, Croatia)

  • Ivica Rubil

    (The Institute of Economics, Zagreb, Croatia)

Abstract

In this paper, we study whether taking into account non-income dimensions along with income while measuring individual well-being matters for cross-country welfare comparisons. We focus on the 27 EU member states over the period 2007-2011, using data from the European Quality of Life Survey. Individual well-being is measured by equivalent income, which is equal to the actual income minus the monetary value of suffering from not having the best achievements in non-income dimensions. Cross-country comparisons of these statistics and their growth rates show that going „beyond income“ makes a substantial difference. In particular, we find that when social welfare is measured by an index sensitive to both mean well-being and its inequality, leaving out non-income dimensions, especially health, from well-being measurement, would leave unexplained more than half of the cross-country variation in social welfare. Taking non-income dimensions into account affects more the part of social welfare that is inequality-sensitive than the one that is mean sensitive.

Suggested Citation

  • Marko Ledic & Ivica Rubil, 2020. "Does going beyond income make a difference? Income vs. equivalent income in the EU over 2007-2011," Public Sector Economics, Institute of Public Finance, vol. 44(4), pages 423-462.
    • Handle: RePEc:ipf:psejou:v:44:y:2020:i:4:p:423-462
    DOI: 10.3326/pse.44.4.1
    as

    Download full text from publisher

    File URL: http://www.pse-journal.hr/upload/files/pse/2020/4/1.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.3326/pse.44.4.1?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Koen Decancq & Marc Fleurbaey & Erik Schokkaert, 2017. "Wellbeing Inequality and Preference Heterogeneity," Economica, London School of Economics and Political Science, vol. 84(334), pages 210-238, April.
    2. Erik Schokkaert & Luc Van Ootegem & Elsy Verhofstadt, 2011. "Preferences and Subjective Satisfaction: Measuring Well-being on the Job for Policy Evaluation," CESifo Economic Studies, CESifo, vol. 57(4), pages 683-714, December.
    3. Christian Dustmann & Francesco Fasani, 2016. "The Effect of Local Area Crime on Mental Health," Economic Journal, Royal Economic Society, vol. 126(593), pages 978-1017, June.
    4. Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, vol. 104(424), pages 648-659, May.
    5. Kolm, Serge-Christophe, 1976. "Unequal inequalities. II," Journal of Economic Theory, Elsevier, vol. 13(1), pages 82-111, August.
    6. Francesca Cornaglia & Naomi E. Feldman & Andrew Leigh, 2014. "Crime and Mental Well-Being," Journal of Human Resources, University of Wisconsin Press, vol. 49(1), pages 110-140.
    7. Nattavudh Powdthavee, 2005. "Unhappiness and Crime: Evidence from South Africa," Economica, London School of Economics and Political Science, vol. 72(287), pages 531-547, August.
    8. Bruno S. Frey, 2018. "Economics of Happiness," SpringerBriefs in Economics, Springer, number 978-3-319-75807-7, October.
    9. Bruno S. Frey & Alois Stutzer, 2002. "What Can Economists Learn from Happiness Research?," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 402-435, June.
    10. Bart Defloor & Elsy Verhofstadt & Luc Van Ootegem, 2017. "The Influence of Preference Information on Equivalent Income," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 131(2), pages 489-507, March.
    11. repec:dau:papers:123456789/12512 is not listed on IDEAS
    12. Kolm, Serge-Christophe, 1976. "Unequal inequalities. I," Journal of Economic Theory, Elsevier, vol. 12(3), pages 416-442, June.
    13. Andrew E. Clark, 2015. "SWB as a Measure of Individual Well-Being," PSE Working Papers halshs-01134483, HAL.
    14. Erik Schokkaert & Carine Van de Voorde & Brigitte Dormont & Marc Fleurbaey & Stéphane Luchini & Anne-Laure Samson & Clémence Thébaut, 2013. "Equity in Health and Equivalent Incomes," Research on Economic Inequality, in: Health and Inequality, volume 21, pages 131-156, Emerald Group Publishing Limited.
    15. John F. Helliwell & Haifang Huang, 2014. "New Measures Of The Costs Of Unemployment: Evidence From The Subjective Well-Being Of 3.3 Million Americans," Economic Inquiry, Western Economic Association International, vol. 52(4), pages 1485-1502, October.
    16. Koen Decancq & Erik Schokkaert, 2016. "Beyond GDP: Using Equivalent Incomes to Measure Well-Being in Europe," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 126(1), pages 21-55, March.
    17. Koen Decancq & Marc Fleurbaey & Erik Schokkaert, 2015. "Happiness, Equivalent Incomes and Respect for Individual Preferences," Economica, London School of Economics and Political Science, vol. 82, pages 1082-1106, December.
    18. DECANCQ, Koen & SCHOKKAERT, Eric & ZULUAGA, Bianca, 2016. "Implementing the Capability Approach with Respect for Individual Valuations : An Illustration with Colombian Data," LIDAM Discussion Papers CORE 2016036, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    19. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
    20. Xavier Jara Tamayo, Holguer & Schokkaert, Erik, 2016. "Putting subjective well-being to use for ex-ante policy evaluation," EUROMOD Working Papers EM9/16, EUROMOD at the Institute for Social and Economic Research.
    21. Anne‐Laure Samson & Erik Schokkaert & Clémence Thébaut & Brigitte Dormont & Marc Fleurbaey & Stéphane Luchini & Carine Van de Voorde, 2018. "Fairness in cost‐benefit analysis: A methodology for health technology assessment," Health Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 102-114, January.
    22. Marc Fleurbaey & Guillaume Gaulier, 2009. "International Comparisons of Living Standards by Equivalent Incomes," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(3), pages 597-624, September.
    23. William A. Darity & Arthur H. Goldsmith, 1996. "Social Psychology, Unemployment and Macroeconomics," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 121-140, Winter.
    24. Marc Fleurbaey, 2015. "Beyond Income and Wealth," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 61(2), pages 199-219, June.
    25. Sen, Amartya, 1973. "On Economic Inequality," OUP Catalogue, Oxford University Press, number 9780198281931.
    26. Dolan, Paul & Peasgood, Tessa & White, Mathew, 2008. "Do we really know what makes us happy A review of the economic literature on the factors associated with subjective well-being," Journal of Economic Psychology, Elsevier, vol. 29(1), pages 94-122, February.
    27. Marko Ledić & Ivica Rubil, 2019. "Decomposing the Difference Between Well-Being Inequality and Income Inequality: Method and Application," Research on Economic Inequality, in: What Drives Inequality?, volume 27, pages 105-122, Emerald Group Publishing Limited.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Marko Ledić & Ivica Rubil, 2021. "Beyond Wage Gap, Towards Job Quality Gap: The Role of Inter-Group Differences in Wages, Non-Wage Job Dimensions, and Preferences," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 155(2), pages 523-561, June.
    2. Romina Boarini & Marc Fleurbaey & Fabrice Murtin & Paul Schreyer, 2022. "Well‐being during the Great Recession: new evidence from a measure of multi‐dimensional living standards with heterogeneous preferences," Scandinavian Journal of Economics, Wiley Blackwell, vol. 124(1), pages 104-138, January.
    3. Andrew E. Clark, 2018. "Four Decades of the Economics of Happiness: Where Next?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 64(2), pages 245-269, June.
    4. Douhou, Salima & Van Soest, Arthur, 2013. "Explaining subjective well-being: The role of victimization, trust, health, and social norms," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 52-78.
    5. Gajdos, Thibault & Maurin, Eric, 2004. "Unequal uncertainties and uncertain inequalities: an axiomatic approach," Journal of Economic Theory, Elsevier, vol. 116(1), pages 93-118, May.
    6. Chakravarty, Satya R. & Sarkar, Palash, 2022. "A synthesis of local and effective tax progressivity measurement," MPRA Paper 115180, University Library of Munich, Germany.
    7. Noelia Somarriba Arechavala & Pilar Zarzosa Espina & Ana Teresa López Pastor, 2022. "The Importance of the Neighbourhood Environment and Social Capital for Happiness in a Vulnerable District: The Case of the Pajarillos District in Spain," Journal of Happiness Studies, Springer, vol. 23(5), pages 1941-1965, June.
    8. Iddisah Sulemana, 2015. "The Effect of Fear of Crime and Crime Victimization on Subjective Well-Being in Africa," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 121(3), pages 849-872, April.
    9. H. Xavier Jara & Erik Schokkaert, 2017. "Putting measures of individual well-being to use for ex-ante policy evaluation," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 15(4), pages 421-440, December.
    10. Nattavudh Powdthavee, 2012. "Jobless, Friendless and Broke: What Happens to Different Areas of Life Before and After Unemployment?," Economica, London School of Economics and Political Science, vol. 79(315), pages 557-575, July.
    11. Luis Bauluz & Filip Novokmet & Moritz Schularick, 2022. "The Anatomy of the Global Saving Glut," Working Papers halshs-03693216, HAL.
    12. Matthew D Rablen, 2012. "The promotion of local wellbeing: A primer for policymakers," Local Economy, London South Bank University, vol. 27(3), pages 297-314, May.
    13. W. Henry Chiu, 2021. "Intersecting Lorenz curves and aversion to inverse downside inequality," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 56(3), pages 487-508, April.
    14. Becchetti, Leonardo & Degli Antoni, Giacomo, 2010. "The sources of happiness: Evidence from the investment game," Journal of Economic Psychology, Elsevier, vol. 31(4), pages 498-509, August.
    15. Francesco Andreoli & Claudio Zoli, 2020. "From unidimensional to multidimensional inequality: a review," METRON, Springer;Sapienza Università di Roma, vol. 78(1), pages 5-42, April.
    16. Pohlan, Laura, 2019. "Unemployment and social exclusion," Journal of Economic Behavior & Organization, Elsevier, vol. 164(C), pages 273-299.
    17. Satya R. Chakravarty & Amita Majumder & Sonali Roy, 2007. "A Treatment Of Absolute Indices Of Polarization," The Japanese Economic Review, Japanese Economic Association, vol. 58(2), pages 273-293, June.
    18. Le Breton, Michel & Peluso, Eugenio, 2010. "Smooth inequality measurement: Approximation theorems," Journal of Mathematical Economics, Elsevier, vol. 46(4), pages 405-415, July.
    19. Zhong, Hai, 2009. "A multivariate analysis of the distribution of individual's welfare in China: What is the role of health?," Journal of Health Economics, Elsevier, vol. 28(6), pages 1062-1070, December.
    20. Walter Bossert & Conchita D'Ambrosio, 2013. "Measuring Economic Insecurity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(3), pages 1017-1030, August.

    More about this item

    Keywords

    well-being; multi-dimensional; equivalent income; social welfare; non-income dimensions;
    All these keywords.

    JEL classification:

    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ipf:psejou:v:44:y:2020:i:4:p:423-462. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Martina Fabris (email available below). General contact details of provider: https://edirc.repec.org/data/ijfffhr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.