Does going beyond income make a difference? Income vs. equivalent income in the EU over 2007-2011

Marko Ledić () and Ivica Rubil ()
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Ivica Rubil: The Institute of Economics, Zagreb, Croatia

Public Sector Economics, 2020, vol. 44, issue 4, 423-462

Abstract: In this paper, we study whether taking into account non-income dimensions along with income while measuring individual well-being matters for cross-country welfare comparisons. We focus on the 27 EU member states over the period 2007-2011, using data from the European Quality of Life Survey. Individual well-being is measured by equivalent income, which is equal to the actual income minus the monetary value of suffering from not having the best achievements in non-income dimensions. Cross-country comparisons of these statistics and their growth rates show that going „beyond income“ makes a substantial difference. In particular, we find that when social welfare is measured by an index sensitive to both mean well-being and its inequality, leaving out non-income dimensions, especially health, from well-being measurement, would leave unexplained more than half of the cross-country variation in social welfare. Taking non-income dimensions into account affects more the part of social welfare that is inequality-sensitive than the one that is mean sensitive.

Keywords: well-being; multi-dimensional; equivalent income; social welfare; non-income dimensions (search for similar items in EconPapers)
JEL-codes: D31 D63 I30 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:ipf:psejou:v:44:y:2020:i:4:p:423-462

DOI: 10.3326/pse.44.4.1

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