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Subjective economic welfare

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  • Ravallion, Martin
  • Lokshin, Michael

Abstract

Paradoxically, when economists analyze a policy's impact on welfare they typically assume that people are the best judges of their own welfare, yet resist directly asking them if they are better off. Early ideas of"utility"were explicitly subjective, but modern economists generally ignore people's expressed views about their own welfare. Even using a broad set of conventional socioeconomic data may not reflect well people's subjective perceptions of their poverty. The authors examine the determinants of subjective economic welfare in Russia, including its relationship to conventional objective indicators. For data on subjective perceptions, they use survey responses in which respondents rate their level of welfare from"poor"to"rich"on a nine-point ladder. As an objective indicator of economic welfare, they use the most common poverty indicator in Russia today, in which household incomes are deflated by household-specific poverty lines. Paradoxically, when economists analyze a policy's impact on welfare they typically assume that people are the best judges of their own welfare, yet resist directly asking them if they are better off. Early ideas of"utility"were explicitly subjective, but modern economists generally ignore people's expressed views about their own welfare. Even using a broad set of conventional socioeconomic data may not reflect well people's subjective perceptions of their poverty. The authors examine the determinants of subjective economic welfare in Russia, including its relationship to conventional objective indicators. For data on subjective perceptions, they use survey responses in which respondents rate their level of welfare from"poor"to"rich"on a nine-point ladder. As an objective indicator of economic welfare, they use the most common poverty indicator in Russia today, in which household incomes are deflated by household-specific poverty lines.

Suggested Citation

  • Ravallion, Martin & Lokshin, Michael, 1999. "Subjective economic welfare," Policy Research Working Paper Series 2106, The World Bank.
  • Handle: RePEc:wbk:wbrwps:2106
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    References listed on IDEAS

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    Cited by:

    1. La Ferrara, Eliana, 2002. "Inequality and group participation: theory and evidence from rural Tanzania," Journal of Public Economics, Elsevier, vol. 85(2), pages 235-273, August.
    2. Luttmer,Erzo F.P., 2001. "Measuring poverty dynamics and inequality in transition economies - disentangling real events from noisy data," Policy Research Working Paper Series 2549, The World Bank.
    3. Michael Bamberger, 2000. "Integrating Quantitative and Qualitative Research in Development Projects," World Bank Publications, The World Bank, number 15253, November.
    4. Asad Alam & Mamta Murthi & Ruslan Yemtsov & Edmundo Murrugarra & Nora Dudwick & Ellen Hamilton & Erwin Tiongson, 2005. "Growth, Poverty and Inequality : Eastern Europe and the Former Soviet Union," World Bank Publications, The World Bank, number 7287, November.
    5. Victoria Giarrizzo, 2009. "Subjective economic welfare: Beyond growth," Economía, Instituto de Investigaciones Económicas y Sociales (IIES). Facultad de Ciencias Económicas y Sociales. Universidad de Los Andes. Mérida, Venezuela, vol. 34(28), pages 9-34, July-Dece.
    6. Claudia Senik, 2002. "When Information Dominates Comparison: A Panel Data Analysis Using Russian Subjective Data," William Davidson Institute Working Papers Series 495, William Davidson Institute at the University of Michigan.
    7. Mauro Migotto & Benjamin Davis & Gero Carletto & Kathleen Beegle, 2005. "Measuring Food Security Using Respondents’ Perception of Food Consumption Adequacy," Working Papers 05-10, Agricultural and Development Economics Division of the Food and Agriculture Organization of the United Nations (FAO - ESA).
    8. Paul Ningaye, 2011. "Ethno-cultural diversity and multidimensional poverty differential in Cameroon," International Journal of Development Issues, Emerald Group Publishing, vol. 10(2), pages 123-140, July.
    9. Ada Ferrer-i-Carbonell, 2013. "Happiness economics," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 4(1), pages 35-60, March.
    10. Gebremedhin, Tesfaye A., 2006. "The Dynamics of Poverty in Urban Ethiopia," 2006 Conference (50th), February 8-10, 2006, Sydney, Australia 139737, Australian Agricultural and Resource Economics Society.
    11. Dávila Quintana, C. Delia & Garcia, Vanessa del Pino González & Feijoó, Santiago Rodri­guez & Caro, Alejandro Rodri­guez, 2008. "Describing poverty in an ultraperipheral region: The case of the Canary Islands," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 37(3), pages 1119-1133, June.
    12. Khadija Shams, 2016. "Developments in the Measurement of Subjective Well-Being and Poverty: An Economic Perspective," Journal of Happiness Studies, Springer, vol. 17(6), pages 2213-2236, December.
    13. repec:dau:papers:123456789/4745 is not listed on IDEAS
    14. Jane Falkingham, 2000. "A Profile of Poverty in Tajikistan," CASE Papers case39, Centre for Analysis of Social Exclusion, LSE.
    15. 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.
    16. Brando Jovanovic, 2000. "Russian Roulette- Expenditure Inequality and Instability in Russia, 1994-1998," William Davidson Institute Working Papers Series 358, William Davidson Institute at the University of Michigan.
    17. Rachel Sabates-Wheeler & Ricardo Sabates & Adriana Castaldo, 2008. "Tackling Poverty-migration Linkages: Evidence from Ghana and Egypt," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 87(2), pages 307-328, June.
    18. Graham, Carol, 2005. "Globalization, Poverty, Inequality, and Insecurity: Some Insights from the Economics of Happiness," WIDER Working Paper Series 033, World Institute for Development Economic Research (UNU-WIDER).
    19. Mireille Razafindrakoto & François Roubaud, 2005. "Les pauvres, la démocratie et le marché : une analyse à partir de trois séries d'enquêtes auprès de la population malgache," Revue d’économie du développement, De Boeck Université, vol. 13(1), pages 53-89.

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