Social Capital Shapes the Relationship Between Well-being and Spending

Fengyu Wu and Francesco Sarracino

No 1647, GLO Discussion Paper Series from Global Labor Organization (GLO)

Abstract: This study examines how subjective well-being (SWB), specifically life satisfaction, influences household consumption expenditures, and the moderating role of social capital. While previous research has largely focused on how consumption affects well-being, we explore the reverse direction, motivated by the hypothesis that higher well-being may reduce consumption needs, particularly among individuals with strong social relations. Using fixed-effects panel regressions on data from the 2006-2010 waves of the Household, Income and Labour Dynamics in Australia (HILDA) Survey, we examine two types of consumption-conspicuous and basic-and three indicators of social capital: social support, low loneliness, and active group membership. Results indicate that the relationship between life satisfaction and consumption expenditures changes significantly with individuals' social capital. Among those with low social support or high loneliness, greater life satisfaction is linked to increased spending on both conspicuous and basic goods and services. However, this positive association weakens or reverses among individuals with strong social ties or low levels of loneliness. These findings suggest that social capital can buffer the link between well-being and consumption, implying that policies fostering social ties and reducing loneliness may help decouple well-being from consumption growth and promote more sustainable lifestyles.

Keywords: Consumption Expenditures; Subjective Well-being; Life Satisfaction; Social Capital; Loneliness (search for similar items in EconPapers)
JEL-codes: A13 D12 I31 Z13 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-soc
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:glodps:1647

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