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Does the choice of well-being measure matter empirically? An illustration with German data

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  • DECANCQ, Koen

    (University Antwerp)

  • NEUMANN, Dirk

    (Université catholique de Louvain, CORE, Belgium)

Abstract

We discuss and compare five measures of individual well-being, namely income, an objective composite well-being index, a measure of subjective well-being, equivalent income, and a well-being measure based on the von Neumann-Morgenstern utilities of the individuals. After examining the information requirements of these measures, we illustrate their implementation using data from the German Socio-Economic Panel (SOEP) for 2010. We find sizeable differences in the characteristics of the individuals identified as worst off according to the different well-being measures. Less than 1% of the individuals belong to the bottom decile according to all five measures. Moreover, the measures lead to considerably different well-being rankings of the individuals. These findings highlight the importance of the choice of well-being measure for policy making.

Suggested Citation

  • DECANCQ, Koen & NEUMANN, Dirk, 2014. "Does the choice of well-being measure matter empirically? An illustration with German data," LIDAM Discussion Papers CORE 2014050, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:2014050
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    2. Poppitz, Philipp, 2017. "Can subjective data improve inequality measurement? A multidimensional index of economic inequality," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168252, Verein für Socialpolitik / German Economic Association.
    3. Sabina Alkire, 2015. "The Capability Approach and Well-Being Measurement for Public Policy," OPHI Working Papers ophiwp094.pdf, Queen Elizabeth House, University of Oxford.
    4. Treich, Nicolas & Espinosa, Romain, 2024. "The Animal-Welfare Levy," TSE Working Papers 24-1503, Toulouse School of Economics (TSE).
    5. Carlotta Balestra & Romina Boarini & Elena Tosetto, 2018. "What Matters Most to People? Evidence from the OECD Better Life Index Users’ Responses," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 136(3), pages 907-930, April.
    6. Philipp Poppitz, 2019. "Can Subjective Data Improve the Measurement of Inequality? A Multidimensional Index of Economic Inequality," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 146(3), pages 511-531, December.

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    More about this item

    Keywords

    income; composite well-being index; life satisfaction; equivalent income; von Neumann-Morgenstern utility function; worst off; Germany;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General

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