Life satisfaction: The role of domain‐specific reference points

Sebastian Neumann‐Böhme, Arthur Attema, Werner Brouwer and Job van Exel

Health Economics, 2021, vol. 30, issue 11, 2766-2779

Abstract: In the evaluation of well‐being, it is not only important what people have in absolute terms, but also how this compares to reference points in relative terms. We explore the relevance of relative comparisons by testing the effect of people's self‐rated position on potential reference points for income and health on their subjective well‐being. We used Multiple Discrepancies Theory as a framework to identify seven potentially relevant reference points for income and health. A representative sample (N = 550) of the Netherlands assessed their income and health relative to these reference points. In addition, we elicited monthly household income, health status (EQ‐5D‐5L), and subjective well‐being (SWLS). In line with the literature, we found a negative convex relationship between subjective well‐being and age and a positive relationship with being employed, income, and health. For income, subjective well‐being was also associated with how current income compared to respondents' needs and progression over time, and for health especially with how current health compared to what they felt they deserved. Our findings suggest that income and health are important for subjective well‐being both in absolute and relative terms. We found negative effects on life satisfaction if some of the domain specific reference points were not met.

Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:wly:hlthec:v:30:y:2021:i:11:p:2766-2779

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