The Pursuit of Subjective Well-Being through Specific Consumption Choice

54 Pages Posted: 23 Aug 2014

See all articles by Stefan Zimmermann

Stefan Zimmermann

University of Vienna - Faculty of Business, Economics, and Statistics

Date Written: August 21, 2014

Abstract

This paper looks at the association of specific consumption goods with subjective well-being (SWB), using a representative sample of US individuals. There is a vast economic literature on the relationship between income and SWB, but surprisingly very little on how individuals spend their income and the associated effects on SWB. Different consumption goods allow to test whether, and through which channels, income might affect SWB. I use panel methods to account for individual heterogeneity. Ordered choice models are used to address the ordinal nature of the SWB data. Unlike linear regression models, this avoids nonsensical out-of-bound predictions and improves efficiency. Total consumption is significantly associated with SWB, but only via certain consumption goods. Consumption is associated with SWB mainly through experiential and conspicuous expenses. Evidence for a causal effect of consumption on SWB is provided.

Keywords: Subjective Well-Being, Life-Satisfaction, Happiness, Depression, Consumption Behavior, Panel Data, Ordered Probit, Ordinal Dependent Variable

JEL Classification: D12, H31, I31

Suggested Citation

Zimmermann, Stefan, The Pursuit of Subjective Well-Being through Specific Consumption Choice (August 21, 2014). Available at SSRN: https://ssrn.com/abstract=2484660 or http://dx.doi.org/10.2139/ssrn.2484660

Stefan Zimmermann (Contact Author)

University of Vienna - Faculty of Business, Economics, and Statistics ( email )

Vienna, A-1090
Austria

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