Capability Deprivation and Life Satisfaction. Evidence from German Panel Data

This paper explores the link between poverty as capability deprivation and current life satisfaction. Using German panel data, I examine both whether capability deprivation reduces life satisfaction and whether individuals eventually adapt to these adverse conditions. Drawing on the capability approach, the constitutive elements of poverty are capability deprivations, which are located in the functioning space. As yet data on functionings often are lacking. Therefore, I explore the conditions and assumptions under which capability deprivation can be inferred from readily available consumption data. Specifically, to detect capability deprivation I draw on the notion of an inadequate income together with nonconsumption data of pivotal goods. The results indicate capability deprivation to reduce life satisfaction significantly. Moreover, the evidence also suggests that individuals fail to adapt within the subsequent four to six years. Finally, the mere lowness of income fails to capture its inadequacy.