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Subjective economic welfare

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Author Info

  • Ravallion, Martin
  • Lokshin, Michael

Abstract

Paradoxically, when economists analyze a policy's impact on welfare they typically assume that people are the best judges of their own welfare, yet resist directly asking them if they are better off. Early ideas of"utility"were explicitly subjective, but modern economists generally ignore people's expressed views about their own welfare. Even using a broad set of conventional socioeconomic data may not reflect well people's subjective perceptions of their poverty. The authors examine the determinants of subjective economic welfare in Russia, including its relationship to conventional objective indicators. For data on subjective perceptions, they use survey responses in which respondents rate their level of welfare from"poor"to"rich"on a nine-point ladder. As an objective indicator of economic welfare, they use the most common poverty indicator in Russia today, in which household incomes are deflated by household-specific poverty lines. Paradoxically, when economists analyze a policy's impact on welfare they typically assume that people are the best judges of their own welfare, yet resist directly asking them if they are better off. Early ideas of"utility"were explicitly subjective, but modern economists generally ignore people's expressed views about their own welfare. Even using a broad set of conventional socioeconomic data may not reflect well people's subjective perceptions of their poverty. The authors examine the determinants of subjective economic welfare in Russia, including its relationship to conventional objective indicators. For data on subjective perceptions, they use survey responses in which respondents rate their level of welfare from"poor"to"rich"on a nine-point ladder. As an objective indicator of economic welfare, they use the most common poverty indicator in Russia today, in which household incomes are deflated by household-specific poverty lines.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2106.

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Date of creation: 30 Apr 1999
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Handle: RePEc:wbk:wbrwps:2106

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Related research

Keywords: Environmental Economics&Policies; Public Health Promotion; Economic Theory&Research; Health Economics&Finance; Services&Transfers to Poor; Environmental Economics&Policies; Economic Theory&Research; Poverty Diagnostics; Inequality; Health Economics&Finance;

References

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  1. Arie Kapteyn & Peter Kooreman & Rob Willemse, 1988. "Some Methodological Issues in the Implementation of Subjective Poverty Definitions," Journal of Human Resources, University of Wisconsin Press, vol. 23(2), pages 222-242.
  2. van Praag, Bernard M. S., 1991. "Ordinal and cardinal utility : An integration of the two dimensions of the welfare concept," Journal of Econometrics, Elsevier, Elsevier, vol. 50(1-2), pages 69-89, October.
  3. Pollak, Robert A., 1991. "Welfare comparisons and situation comparisons," Journal of Econometrics, Elsevier, Elsevier, vol. 50(1-2), pages 31-48, October.
  4. Pollak, Robert A & Wales, Terence J, 1979. "Welfare Comparisons and Equivalence Scales," American Economic Review, American Economic Association, American Economic Association, vol. 69(2), pages 216-21, May.
  5. Browning, Martin, 1992. "Children and Household Economic Behavior," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 30(3), pages 1434-75, September.
  6. Oswald, Andrew, 1997. "Happiness and Economic Performance," The Warwick Economics Research Paper Series (TWERPS), University of Warwick, Department of Economics 478, University of Warwick, Department of Economics.
  7. Nelson, Julie A, 1993. "Household Equivalence Scales: Theory versus Policy?," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 11(3), pages 471-93, July.
  8. Frank, Robert H, 1997. "The Frame of Reference as a Public Good," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 107(445), pages 1832-47, November.
  9. Veall, Michael R & Zimmermann, Klaus F, 1996. " Pseudo-R-[superscript 2] Measures for Some Common Limited Dependent Variable Models," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 10(3), pages 241-59, September.
  10. Kapteyn, A.J., 1994. "The measurement of household cost functions: Revealed preference versus subjective measures," Open Access publications from Tilburg University, Tilburg University urn:nbn:nl:ui:12-364386, Tilburg University.
  11. Kapteyn, A.J., 1994. "The measurement of household cost functions: Revealed preference versus subjective measures," Discussion Paper, Tilburg University, Center for Economic Research 1994-3, Tilburg University, Center for Economic Research.
  12. Lanjouw, Peter & Ravallion, Martin, 1995. "Poverty and Household Size," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 105(433), pages 1415-34, November.
  13. Blackorby, Charles & Donaldson, David, 1987. "Welfare ratios and distributionally sensitive cost-benefit analysis," Journal of Public Economics, Elsevier, Elsevier, vol. 34(3), pages 265-290, December.
  14. Winkelmann, Liliana & Winkelmann, Rainer, 1998. "Why Are the Unemployed So Unhappy? Evidence from Panel Data," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 65(257), pages 1-15, February.
  15. Ed Diener, 1994. "Assessing subjective well-being: Progress and opportunities," Social Indicators Research, Springer, Springer, vol. 31(2), pages 103-157, February.
  16. Pradhan, Menno & Ravallion, Martin, 1998. "Measuring poverty using qualitative perceptions of welfare," Policy Research Working Paper Series 2011, The World Bank.
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Citations

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Cited by:
  1. Migotto, Mauro & Davis, Benjamin & Carletto, Gero & Beegle, Kathleen, 2006. "Measuring Food Security Using Respondents' Perception of Food Consumption Adequacy," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) RP2006/88, World Institute for Development Economic Research (UNU-WIDER).
  2. Eliana La Ferrara, 2000. "Inequality and Group Participation: Theory and Evidence from Rural Tanzania," Development Working Papers, Centro Studi Luca d\'Agliano, University of Milano 138, Centro Studi Luca d\'Agliano, University of Milano.
  3. Valentina Zigante, 2008. "Ever Rising Expectations: the Determinants of Subjective Welfare in Croatia," Financial Theory and Practice, Institute of Public Finance, Institute of Public Finance, vol. 32(2), pages 115-138.
  4. Asad Alam & Mamta Murthi & Ruslan Yemtsov & Edmundo Murrugarra & Nora Dudwick & Ellen Hamilton & Erwin Tiongson, 2005. "Growth, Poverty and Inequality : Eastern Europe and the Former Soviet Union," World Bank Publications, The World Bank, number 7287, August.
  5. Brando Jovanovic, 2000. "Russian Roulette- Expenditure Inequality and Instability in Russia, 1994-1998," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan 358, William Davidson Institute at the University of Michigan.
  6. Michael Bamberger, 2000. "Integrating Quantitative and Qualitative Research in Development Projects," World Bank Publications, The World Bank, number 15253, August.
  7. Jane Falkingham, 2000. "A Profile of Poverty in Tajikistan," CASE Papers, Centre for Analysis of Social Exclusion, LSE case39, Centre for Analysis of Social Exclusion, LSE.
  8. Dávila Quintana, C. Delia & Garcia, Vanessa del Pino González & Feijoó, Santiago Rodri­guez & Caro, Alejandro Rodri­guez, 2008. "Describing poverty in an ultraperipheral region: The case of the Canary Islands," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, Elsevier, vol. 37(3), pages 1119-1133, June.
  9. Luttmer, Erzo F.P., 2001. "Measuring poverty dynammics and inequality in transition economies - disentangling real events from noisy data," Policy Research Working Paper Series 2549, The World Bank.
  10. Graham, Carol, 2005. "Globalization, Poverty, Inequality, and Insecurity: Some Insights from the Economics of Happiness," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) RP2005/33, World Institute for Development Economic Research (UNU-WIDER).
  11. Mireille Razafindrakoto & François Roubaud, 2005. "Les pauvres, la démocratie et le marché : une analyse à partir de trois séries d'enquêtes auprès de la population malgache," Revue d’économie du développement, De Boeck Université, vol. 19(1), pages 53-89.
  12. Claudia Senik, 2002. "When Information Dominates Comparison. A Panel Data Analysis Using Russian Subjective Data," DELTA Working Papers, DELTA (Ecole normale supérieure) 2002-02, DELTA (Ecole normale supérieure).
  13. Rachel Sabates-Wheeler & Ricardo Sabates & Adriana Castaldo, 2008. "Tackling Poverty-migration Linkages: Evidence from Ghana and Egypt," Social Indicators Research, Springer, Springer, vol. 87(2), pages 307-328, June.
  14. Victoria Giarrizzo, 2009. "Subjective economic welfare: Beyond growth," Economía, Instituto de Investigaciones Económicas y Sociales (IIES). Facultad de Ciencias Económicas y Sociales. Universidad de Los Andes. Mérida, Venezuela, Instituto de Investigaciones Económicas y Sociales (IIES). Facultad de Ciencias Económicas y Sociales. Universidad de Los Andes. Mérida, Venezuela, vol. 34(28), pages 9-34, July-Dece.
  15. Ada Ferrer-i-Carbonell, 2002. "Subjective Questions to Measure Welfare and Well-being," Tinbergen Institute Discussion Papers, Tinbergen Institute 02-020/3, Tinbergen Institute.

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