Does the choice of well-being measure matter empirically? An illustration with German data
Faculty of Social Sciences. Sociology
Bonn :Forschungsinstitut zur Zukunft der Arbeit, 2014
IZA discussion paper ; 8589
University of Antwerp
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 wellbeing rankings of the individuals. These findings highlight the importance of the choice of well-being measure for policy making.