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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 of Antwerp)

  • Neumann, Dirk

    (Federal Ministry for Economic Affairs and Climate Action (BMWK), Germany)

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," IZA Discussion Papers 8589, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp8589
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    Cited by:

    1. Philipp Poppitz, 2017. "Can subjective data improve inequality measurement? A multidimensional index of economic inequality," Working Papers 446, ECINEQ, Society for the Study of Economic Inequality.
    2. 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.
    3. Lordan, Grace & Mcguire, Alistair, 2019. "Widening the high school curriculum to include soft skill training: impacts on health, behaviour, emotional wellbeing and occupational aspirations," LSE Research Online Documents on Economics 101234, London School of Economics and Political Science, LSE Library.
    4. Sabina Alkire, 2015. "The Capability Approach and Well-Being Measurement for Public Policy," OPHI Working Papers ophiwp094.pdf, Queen Elizabeth House, University of Oxford.
    5. Treich, Nicolas & Espinosa, Romain, 2024. "The Animal-Welfare Levy," TSE Working Papers 24-1503, Toulouse School of Economics (TSE).
    6. 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.

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    More about this item

    Keywords

    von Neumann-Morgenstern utility function; equivalent income; life satisfaction; composite well-being index; income; 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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