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The Effect of Income and Wealth on Subjective Well-Being in the Context of Different Welfare State Regimes

Miha Dominko () and Miroslav Verbič ()
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Miha Dominko: Institute for Economic Research

Journal of Happiness Studies, 2021, vol. 22, issue 1, No 10, 206 pages

Abstract: Abstract In this article, we study the causal effects of two economic standing measures on the subjective well-being of the elderly, as well as the moderating effects of distinct welfare regimes on these relationships. For our analysis, we classify countries into the following welfare regimes: Conservative, Social-democratic, Mediterranean, and Post-socialist. We address the income endogeneity issue by utilizing the panel structure of our data and instrumenting for income. Our findings show that the significance and strength of the effects of both economic standing measures on life satisfaction are moderated by the institutional context or welfare regime type, which we support by providing several robustness checks. Finally, we make a deeper inquiry into the heterogeneity of the countries classified. After controlling for endogeneity, our results indicate that the relationship between economic standing and life satisfaction is mostly driven by individual countries, which suggests caution when studying the effect of economic standing on subjective well-being.

Keywords: Subjective well-being; Life satisfaction; Income; Wealth; Instrumental variable estimation; Welfare (search for similar items in EconPapers)
JEL-codes: D31 I31 I38 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s10902-020-00225-9

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