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Does the choice of well-being measure matter empirically? An illustration with German data

Koen Decancq () and Dirk Neumann ()

No 2014050, CORE Discussion Papers from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: We discuss and compare five measures of individual well-being, namely income, an objective composite well-being index, a measure of subjective well-being, equivalent income, and a well-being measure based on the von Neumann-Morgenstern utilities of the individuals. After examining the information requirements of these measures, we illustrate their implementation using data from the German Socio-Economic Panel (SOEP) for 2010. We find sizeable differences in the characteristics of the individuals identified as worst off according to the different well-being measures. Less than 1% of the individuals belong to the bottom decile according to all five measures. Moreover, the measures lead to considerably different well-being rankings of the individuals. These findings highlight the importance of the choice of well-being measure for policy making.

Keywords: income; composite well-being index; life satisfaction; equivalent income; von Neumann-Morgenstern utility function; worst off; Germany (search for similar items in EconPapers)
JEL-codes: D31 D63 I30 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eur, nep-hap, nep-ltv and nep-upt
Date: 2014-10-31
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http://uclouvain.be/cps/ucl/doc/core/documents/coredp2014_50web.pdf (application/pdf)

Related works:
Working Paper: Does the Choice of Well-Being Measure Matter Empirically?: An Illustration with German Data (2014) Downloads
Working Paper: Does the Choice of Well-Being Measure Matter Empirically? An Illustration with German Data (2014) Downloads
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