Income or consumption: Which better predicts subjective wellbeing?

Tom Carver and Arthur Grimes

No 290567, Motu Working Papers from Motu Economic and Public Policy Research

Abstract: The positive relationship between income and subjective wellbeing has been well documented. However, work assessing the relationship of alternative material wellbeing metrics to subjective wellbeing is limited. Consistent with the permanent income hypothesis, we find that a consumption measure out-performs income in predicting subjective wellbeing. When objective measures of consumption are combined with self-assessments of a household’s standard of living, income becomes insignificant altogether. We obtain our result utilising household-level data from Statistics New Zealand’s ‘New Zealand General Social Survey’ which contains a measure of material wellbeing called the ‘Economic Living Standard Index’ that combines measures of consumption flows and self-assessments of material wellbeing.

Keywords: Consumer/Household; Economics (search for similar items in EconPapers)
Pages: 44
Date: 2016-08
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Persistent link: https://EconPapers.repec.org/RePEc:ags:motuwp:290567

DOI: 10.22004/ag.econ.290567

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