Does Well-Being Vary with an Individual-Specific Weighting Scheme?

Abstract

In terms of a composite well-being indicator, literature remains inconclusive regarding the appropriate weighting scheme to apply. Although condemned as arbitrary, equal weights remain popular and are applied in several global indicators. This paper examines whether the well-being level is sensitive to the underlying weighting scheme by comparing equal weights to non-paternalistic weights. Using a representative sample of 1431 Dutch speaking Belgians, we present a well-being index based on five dimensions: health, income, education, family life, and social life. The non-paternalistic weighting scheme is derived by asking respondents to think about the importance of the five dimensions to their well-being, and based on this importance allocate 100 points over the dimensions. We find that the underlying weighting scheme affects the well-being level of individuals who report low outcomes on some dimensions and high on others. We also find that the two schemes deem different groups of individuals to be in the bottom decile, affecting the beneficiaries of a policy targeting the worst-off. Since the well-being of respondents performing poorly on all five dimensions will be low regardless of the applied weights, we recommend the use of non-paternalistic weights to evaluate the well-being of respondents with a varying outcome across dimensions. This recommendation is based on the notion that well-being is intrinsically personal, and therefore is best evaluated by the individuals themselves.