Measuring welfare with the use of the MIMIC approach: evidence for Poland

Abstract

The growing interest in the concept of using welfare categories as a measure of economic or social development results from the fact that dominant income categories have been replaced by solutions related to individuals’ basic, existential and higher-order needs being fulfilled. The transition from analysing the poverty rate category, through the various approaches to material deprivation, to the perception of welfare in economic, subjective, or hidden terms is visible. The main purpose of the study is to estimate the subjective level of welfare of households in Poland. The subjective level of various socio-economic phenomena is often difficult to estimate; therefore, the study uses the approach of structural modelling for the multiple indicators and multiple causes model (MIMIC), which assumes the presence of a latent variable. The research is based on data from the Social Diagnosis panel study for household level in Poland. Based on the construction and positive substantive and statistical verification of the model the results show that subjectively the best welfare situation was identified mainly for households located in countryside areas, where even the lowest estimated levels of welfare exceed the highest estimated levels for cities of various sizes. Investigating the spatial distribution, the highest levels of subjective welfare were recorded for the Lubelskie and Swietokrzyskie voivodeships, and thanks to moving to a higher spatial data aggregation level (to the sub-regional), a more detailed assessment of spatial units was possible. In further research, individualised voivodeship models will be estimated to capture a more accurate differentiation of the influence of MIMIC model variables. A similar direction of analysis is anticipated for sub-regional data.