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Relative Standing and Life-Satisfaction: Does Unobserved Heterogeneity Matter?

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  • Alem, Yonas

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

Abstract

Unlike most studies of subjective well-being in developing countries, we use a fixed effects regression on three rounds of rich panel data to investigate the impact of relative standing on life satisfaction of respondents in urban Ethiopia. We find a consistently large negative impact of relative standing - both relative to others and to oneself over time - on subjective well-being. However, controlling for unobserved heterogeneity through a fixed effects model reduces the impact of the relative standing variables on subjective well-being by up to 24 percent and reduces the impact of economic status by about 40 percent. Our findings highlight the need to be cautious in interpreting parameter estimates from subjective well-being regressions based on cross-sectional data, as the impact of variables may not be disentangled from that of unobserved heterogeneity.

Suggested Citation

  • Alem, Yonas, 2013. "Relative Standing and Life-Satisfaction: Does Unobserved Heterogeneity Matter?," Working Papers in Economics 579, University of Gothenburg, Department of Economics.
    • Handle: RePEc:hhs:gunwpe:0579
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    File URL: http://hdl.handle.net/2077/34642
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    References listed on IDEAS

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    Cited by:

    1. Mekonnen, Daniel Ayalew & Gerber, Nicolas, 2016. "Aspirations and income, food security and subjective well-being in rural Ethiopia," Discussion Papers 234562, University of Bonn, Center for Development Research (ZEF).
    2. Rodrigo Montero & Tom�s Rau, 2015. "Part-time Work, Job Satisfaction and Well-being: Evidence from a Developing OECD Country," Journal of Development Studies, Taylor & Francis Journals, vol. 51(4), pages 370-385, April.
    3. Muna Shifa & Murray Leibbrandt, 2018. "Relative Economic Position and Subjective Well-Being in a Poor Society: Does Relative Position Indicator Matter?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 139(2), pages 611-630, September.

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    More about this item

    Keywords

    life satisfaction; urban Ethiopia; relative standing; fixed effects;
    All these keywords.

    JEL classification:

    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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