Income or Consumption: Which Better Predicts Subjective Wellbeing?

Thomas Carver () and Arthur Grimes
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Thomas Carver: Motu Economic and Public Policy Research

No 16_12, 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: Life satisfaction; Subjective Wellbeing; Consumption; Permanent Income Hypothesis; Material Wellbeing (search for similar items in EconPapers)
JEL-codes: D12 D63 E21 I31 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2016-09
New Economics Papers: this item is included in nep-hap, nep-hpe, nep-mac and nep-sog
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Income or Consumption: Which Better Predicts Subjective Well‐Being? (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:mtu:wpaper:16_12

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