Does Income Class Affect Life Satisfaction? New Evidence from Cross-Country Microdata

Joanne Haddad, Jad Chaaban, Ali Chalak and Hala Ghattas
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Joanne Haddad: ECARES, Université Libre de Bruxelles, 1050 Brussels, Belgium
Jad Chaaban: Department of Agriculture, Faculty of Agricultural and Food Sciences, American University of Beirut, Beirut 1107 2020, Lebanon
Ali Chalak: Department of Agriculture, Faculty of Agricultural and Food Sciences, American University of Beirut, Beirut 1107 2020, Lebanon
Hala Ghattas: Center for Research on Population and Health, Faculty of Health Sciences, American University of Beirut, Beirut 1107 2020, Lebanon

Social Sciences, 2022, vol. 11, issue 6, 1-23

Abstract: This paper analyzes the impact of income class on subjective wellbeing. Using rich data from the Gallup World Poll, we investigate whether belonging to locally (both country- and time-specific) defined income classes influences individuals’ life satisfaction. We rely on a latent class analysis estimation method, using individual income proxied by household income divided by household size, as an observable characteristic to hypothesize the income classes. We fit a model with one categorical latent variable with three unobserved groupings, here: income classes, which we interpret as lower, middle and upper classes. Our estimates suggest that individuals in the low and middle income classes are, respectively, about 30 and 17 percent of a standard deviation less likely to report a higher life satisfaction in comparison to individuals belonging to the upper income class. The effect of income classes remains robust to the inclusion of standard explanatory variables in this literature.

Keywords: income classes; income; life satisfaction; well-being; Gallup World Poll; latent class analysis (search for similar items in EconPapers)
JEL-codes: A B N P Y80 Z00 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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