Template-Type: ReDIF-Paper 1.0
Author-Name: Thomas Carver
Author-X-Name-First: Thomas
Author-X-Name-Last: Carver
Author-Email: tom.carver@motu.org.nz
Author-Workplace-Name: Motu Economic and Public Policy Research
Author-Name: Arthur Grimes
Author-X-Name-First: Arthur
Author-X-Name-Last: Grimes
Author-Email: arthur.grimes@motu.org.nz
Author-Workplace-Name: Motu Economic and Public Policy Research
Title: Income or Consumption: Which Better Predicts Subjective Wellbeing?
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.
Length: 44 pages
Creation-Date: 2016-09
File-URL: https://motu-www.motu.org.nz/wpapers/16_12.pdf
Number: 16_12
Classification-JEL: D12, D63, E21, I31
Keywords: Life satisfaction, Subjective Wellbeing, Consumption, Permanent Income Hypothesis, Material Wellbeing 
Handle: RePEc:mtu:wpaper:16_12