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Capabilities and Choices: Do They Make Sen'se for Understanding Objective and Subjective Well-Being? An Empirical Test of Sen's Capability Framework on German and British Panel Data

  • Ruud Muffels
  • Bruce Headey

In Sen's Capability Approach (CA) well-being can be defined as the freedom of choice to achieve the things in life which one has reason to value most for his or her personal life. Capabilities are in Sen's vocabulary therefore the real freedoms people have or the opportunities available to them. In this paper we examine the impact of capabilities alongside choices on subjective and objective well-being. There is a lot of theoretical work on Sen's capability framework but still a lack of empirical research in measuring and testing his capability model especially in a dynamic perspective. The aim of the paper is to elaborate and test a "stock-flow" model measuring capabilities and choices to explain longer-term changes in well-being using 25 years of German and 18 years of British data. Three measures of well-being are constructed: life satisfaction for subjective well-being (SWB) and relative income and employment security for objective well-being (OWB). We ran random and fixed effects GLS models. The findings strongly support Sen's capabilities framework and provide new evidence on the way capabilities and choices matter for well-being. Capabilities indicated by human capital, trust, altruism and risk taking, and family, work-leisure, lifestyle and social choices show to strongly affect the three well-being indicators but their effect sizes differ largely dependent on the type of indicator used.

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Paper provided by DIW Berlin, The German Socio-Economic Panel (SOEP) in its series SOEPpapers on Multidisciplinary Panel Data Research with number 385.

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Length: 32 p.
Date of creation: 2011
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Handle: RePEc:diw:diwsop:diw_sp385
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  1. Bruce Headey & Ruud Muffels & Mark Wooden, 2008. "Money Does not Buy Happiness: Or Does It? A Reassessment Based on the Combined Effects of Wealth, Income and Consumption," Social Indicators Research, Springer, vol. 87(1), pages 65-82, May.
  2. Sen, Amartya, 1983. "Poor, Relatively Speaking," Oxford Economic Papers, Oxford University Press, vol. 35(2), pages 153-69, July.
  3. Alkire, Sabina, 2008. "Choosing Dimensions: The Capability Approach and Multidimensional Poverty," MPRA Paper 8862, University Library of Munich, Germany.
  4. Clark, Andrew E. & Diener, Ed & Georgellis, Yannis & Lucas, Richard E., 2008. "Lags and Leads in Life Satisfaction: A Test of the Baseline Hypothesis," CEPREMAP Working Papers (Docweb) 0803, CEPREMAP.
  5. Easterlin, Richard A, 2001. "Income and Happiness: Towards an Unified Theory," Economic Journal, Royal Economic Society, vol. 111(473), pages 465-84, July.
  6. Frick, Joachim R. & Jenkings, Stephen P. & Lillard, Dean R. & Lipps, Oliver & Wooden, Mark, 2007. "The Cross-National Equivalent File (CNEF) and Its Member Country Household Panel Studies," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 627-654.
  7. Bruce Headey & Ruud Muffels & Gert Wagner, 2013. "Choices Which Change Life Satisfaction: Similar Results for Australia, Britain and Germany," Social Indicators Research, Springer, vol. 112(3), pages 725-748, July.
  8. Dohmen Thomas & Falk Armin & Huffman David & Sunde Uwe & Schupp Jürgen & Wagner Gert G., 2009. "Individual Risk Attitudes: Measurement, Determinants and Behavioral Consequences," Research Memorandum 039, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  9. Amartya Sen, 2005. "Human Rights and Capabilities," Journal of Human Development and Capabilities, Taylor & Francis Journals, vol. 6(2), pages 151-166.
  10. Gary S. Becker, 1975. "Human Capital: A Theoretical and Empirical Analysis, with Special Reference to Education, Second Edition," NBER Books, National Bureau of Economic Research, Inc, number beck75-1.
  11. Headey, Bruce & Muffels, Ruud & Wooden, Mark, 2004. "Money Doesn’t Buy Happiness… Or Does It? A Reconsideration Based on the Combined Effects of Wealth, Income and Consumption," IZA Discussion Papers 1218, Institute for the Study of Labor (IZA).
  12. Richard Ball & Kateryna Chernova, 2008. "Absolute Income, Relative Income, and Happiness," Social Indicators Research, Springer, vol. 88(3), pages 497-529, September.
  13. Didier Fouarge & Anna Manzoni & Ruud Muffels & Ruud Luijkx, 2010. "Childbirth and cohort effects on mothers' labour supply: a comparative study using life history data for Germany the Netherlands and Great Britain," Work, Employment & Society, British Sociological Association, vol. 24(3), pages 487-507, September.
  14. Ruud Muffels & Bauke Kemperman, 2011. "Does a Better Job Match Make Women Happier?: Work Orientations, Work-Care Choices and Subjective Well-Being in Germany," SOEPpapers on Multidisciplinary Panel Data Research 361, DIW Berlin, The German Socio-Economic Panel (SOEP).
  15. Daniel Kahneman, 2003. "A Psychological Perspective on Economics," American Economic Review, American Economic Association, vol. 93(2), pages 162-168, May.
  16. Guven, Cahit & Senik, Claudia & Stichnoth, Holger, 2009. "You Can't Be Happier than Your Wife: Happiness Gaps and Divorce," IZA Discussion Papers 4599, Institute for the Study of Labor (IZA).
  17. Oswald, Andrew J. & Wu, Stephen, 2010. "Objective Confirmation of Subjective Measures of Human Well-being: Evidence from the USA," IZA Discussion Papers 4695, Institute for the Study of Labor (IZA).
  18. Daniel Kahneman & Alan B. Krueger, 2006. "Developments in the Measurement of Subjective Well-Being," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 3-24, Winter.
  19. Dohmen, Thomas J & Falk, Armin & Huffman, David & Schupp, Jürgen & Sunde, Uwe & Wagner, Gert Georg, 2006. "Individual Risk Attitudes: New Evidence from a Large, Representative, Experimentally-Validated Survey," CEPR Discussion Papers 5517, C.E.P.R. Discussion Papers.
  20. Sen, Amartya, 1999. "Commodities and Capabilities," OUP Catalogue, Oxford University Press, number 9780195650389.
  21. Bruce Headey, 2008. "Life Goals Matter to Happiness: A Revision of Set-Point Theory," Social Indicators Research, Springer, vol. 86(2), pages 213-231, April.
  22. Clark, Andrew E. & Frijters, Paul & Shields, Michael A., 2007. "Relative Income, Happiness and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," IZA Discussion Papers 2840, Institute for the Study of Labor (IZA).
  23. Bruce Headey, 1993. "An economic model of subjective well-being: Integrating economic and psychological theories," Social Indicators Research, Springer, vol. 28(2), pages 97-116, February.
  24. Hall, Peter A. & Soskice, David (ed.), 2001. "Varieties of Capitalism: The Institutional Foundations of Comparative Advantage," OUP Catalogue, Oxford University Press, number 9780199247752.
  25. Amartya Sen, 2004. "Capabilities, Lists, And Public Reason: Continuing The Conversation," Feminist Economics, Taylor & Francis Journals, vol. 10(3), pages 77-80.
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