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Ever Rising Expectations: the Determinants of Subjective Welfare in Croatia


  • Valentina Zigante

    (School of Economics and Management, Lund University, Sweden)


The focus of this paper is the subjective welfare of the individual in the case of Croatia, a country that in the 1990s carried out a transformation from a socialist to a market-based economy while being at war as a result of the break-up of the former Yugoslavia. Subjective welfare is commonly found to be different from welfare as measured by objective criteria such as income. This difference is first explored by profiling poverty based on the two measures, and here the largest difference is found among those who are not objectively poor. Further the determinants of subjective welfare are analyzed in an ordered probit model broadly grouped as objective variables of personal or household circumstances, and measures of relative income, individual income compared with different reference groups. The results show that, apart from absolute income, which leaves large room for other explanations, relative income is the strongest determinant. This can be connected to the transition heritage of Croatia and is also in line with what has been found in other countries.

Suggested Citation

  • Valentina Zigante, 2008. "Ever Rising Expectations: the Determinants of Subjective Welfare in Croatia," Financial Theory and Practice, Institute of Public Finance, vol. 32(2), pages 115-138.
  • Handle: RePEc:ipf:finteo:v:32:y:2008:i:2:p:115-138

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    References listed on IDEAS

    1. Peter Sanfey & Utku Teksoz, 2007. "Does transition make you happy?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 15, pages 707-731, October.
    2. KNIGHT, John & SONG, Lina & GUNATILAKA, Ramani, 2009. "Subjective well-being and its determinants in rural China," China Economic Review, Elsevier, vol. 20(4), pages 635-649, December.
    3. Ravallion, Martin & Lokshin, Michael, 2002. "Self-rated economic welfare in Russia," European Economic Review, Elsevier, vol. 46(8), pages 1453-1473, September.
    4. 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.
    5. Daniel Neff, 2007. "Subjective Well-Being, Poverty and Ethnicity in South Africa: Insights from an Exploratory Analysis," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 80(2), pages 313-341, January.
    6. 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, vol. 10(3), pages 241-259, September.
    7. Ravallion, Martin & Lokshin, Michael, 1999. "Subjective economic welfare," Policy Research Working Paper Series 2106, The World Bank.
    8. Ravallion, Martin & Lokshin, Michael, 2001. "Identifying Welfare Effects from Subjective Questions," Economica, London School of Economics and Political Science, vol. 68(271), pages 335-357, August.
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    More about this item


    Croatia; financial satisfaction; ordered probit model; poverty; subjective welfare;

    JEL classification:

    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models


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