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Poverty is a Public Bad: Panel Evidence From Subjective Well‐Being Data

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  • Heinz Welsch
  • Philipp Biermann

Abstract

Previous research has found that subjective well‐being (SWB) is lower for individuals classified as being in poverty. We extend the poverty‐SWB literature by focusing on aggregate poverty. Using panel data for 39,239 individuals living in Germany from 2005–2013, we show that people's SWB is negatively correlated with the regional (state‐level) poverty ratio while controlling for individual poverty status and poverty intensity. This suggests that poverty is a public bad. The negative relationship between aggregate poverty and SWB is more salient in the upper segments of the income distribution and is robust to controlling for the rate of unemployment and per capita GDP. The character of poverty as a public bad suggests that poverty alleviation is a matter not only of distributive justice, but of allocative efficiency.

Suggested Citation

  • Heinz Welsch & Philipp Biermann, 2019. "Poverty is a Public Bad: Panel Evidence From Subjective Well‐Being Data," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 65(1), pages 187-200, March.
    • Handle: RePEc:bla:revinw:v:65:y:2019:i:1:p:187-200
    DOI: 10.1111/roiw.12350
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    1. Schröder, Carsten & König, Johannes & Fedorets, Alexandra & Goebel, Jan & Grabka, Markus M. & Lüthen, Holger & Metzing, Maria & Schikora, Felicitas & Liebig, Stefan, 2020. "The economic research potentials of the German Socio-Economic Panel study," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 21(3), pages 335-371.
    2. Edsel L. Beja Jr., 2017. "Subjective well-being approach for testing money illusion-evidence using data from Social Weather Stations," Philippine Review of Economics, University of the Philippines School of Economics and Philippine Economic Society, vol. 54(1), pages 47-62, June.
    3. Seonghoon Kim & Andrew J. Oswald, 2021. "Happy Lottery Winners and Lottery‐Ticket Bias," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 67(2), pages 317-333, June.

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    More about this item

    JEL classification:

    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • D60 - Microeconomics - - Welfare Economics - - - General

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