Subjective well-being: an intersection between economics and psychology

This thesis uses subjective well-being data to understand the impact that an individual’s economic circumstances have on their well-being. Chapters 2, 3, 4 and 5 look specifically at the role of income on well-being; whilst Chapters 6 and 7 focus on the effect of employment status. This thesis draws heavily on psychological concepts and ideas; highlighting that an interdisciplinary approach to subjective well-being data can have substantial benefits to the study of well-being. Chapter 2 seeks to understand how people compare their incomes with one another. Relative judgment models from psychology are explored and the evidence suggests that individuals may be concerned with their rank position rather than their absolute position or how they compare relative to a mean level. Applying this idea to relative income studies it is shown that an individual’s rank income provides a better explanation of life satisfaction than either absolute income or their income relative to the mean income of those around them. Chapter 3 highlights that although more money may reduce psychological distress it is a relatively inefficient way to do so. This chapter provides medical evidence to suggest that psychological therapy is a more efficient way to reduce psychological distress. Income growth does not appear to increase national well-being in developed countries so this chapter suggests that increasing access to mental health care could be a better way to raise national well-being. Personality, although appropriately controlled for, is mostly ignored by economists researching subjective well-being data. Chapters 4, 5 and 6 therefore explore the use of personality measures in economic subjective well-being research. Chapter 4 proposes a new methodological technique that incorporates personality measures. Chapters 5 and 6 then show that personality interacts with important economic variables. These chapters show that personality is an important aspect to be understood by economists. Chapter 7 demonstrates the importance of using longitudinal data to understand causal effects on well-being. Improvements to occupational status have been argued to lead directly to improvements to health. This argument has been based solely on the cross-sectional association that individuals with high occupational status tend to have better health. Chapter 7 shows that improvements to occupational status actually tend to increase mental strain. Taken altogether these studies suggest that subjective well-being data provides a useful arena in which interdisciplinary research can be conducted