Does the Choice of Well-Being Measure Matter Empirically? An Illustration with German Data

Koen Decancq and Dirk Neumann ()

No 8589, IZA Discussion Papers from Institute of Labor Economics (IZA)

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: von Neumann-Morgenstern utility function; equivalent income; life satisfaction; composite well-being index; income; worst off; Germany (search for similar items in EconPapers)
JEL-codes: D31 D63 I30 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2014-10
New Economics Papers: this item is included in nep-eur, nep-hap, nep-ltv, nep-neu and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Forthcoming - revised version published in: M. Adler, M. Fleurbaey (eds.), Oxford Handbook of Well-Being and Public Policy, OUP, 2016, 553-587

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Related works:
Working Paper: Does the choice of well-being measure matter empirically? An illustration with German data (2014)
Working Paper: Does the Choice of Well-Being Measure Matter Empirically?: An Illustration with German Data (2014)
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