Economic Welfare, Poverty, and Subjective Wellbeing

Abstract

This chapter explores empirically the relationship between indicators of economic wellbeing (principally household income) and subjective wellbeing (SWB). Past research indicates that at low levels of income the relationship between economic and subjective indicators of wellbeing is positive and strong (e.g., Veenhoven, 1991; Diener et al., 1999; Hirata, 2001). However, economic indicators, such as income, usually explain only a low proportion of the interpersonal variation in SWB: a correlation coefficient of 0.45, in their study of slum dwellers in Calcutta, being the highest encountered in the literature by Biswas-Diener and Diener (2001). Such research has also mostly been restricted to using standard measurses of global happiness or satisfaction with life (Frey and Stutzer, 2002a; 2002b; Kingdon and Knight, 2006), and this chapter points beyond this toward analysis of the relationship between economic indicators and a eudaimonic view of wellbeing based on satisfaction with achievement of locally defined goals. We start with a brief review of existing literature linking economic indicators and SWB in Peru. Section 4.2 then presents data on household income, expenditure, and head count poverty incidence in each of the seven research sites. Section 4.3 analyzes the relationship between household economic indicators and reported happiness of a subsample of adults belonging to the same households.