Subjective well-being and poverty


The economic well-being of an individual can be measured in several ways. The conventional income poverty approach aims at determining objectively whether individuals’ income falls short from a pre-defined income poverty line. Or we can rely on subjective information about the experienced level of financial difficulties. Despite being distinct, these two concepts are also likely interrelated. As can be expected, the objective situation unveiled by the income poverty approach directly influences individuals’ perceptions. In addition to be influenced by the current objective situation, current perceptions may be affected by the lasting effects of the previous poverty status. In turn, and less expected, individuals’ current perceptions may affect their income-generating abilities which might then impact on their future poverty status. However, our empirical knowledge about the extent to which these two concepts are dynamically interrelated is limited. One of the aims of this research line is precisely to analyse the dynamic cross-effects between objective and subjective well-being.

The second objective of this line of research aims at studying the relationship between subjective well-being and poverty. We would like to know to what extent poverty and psychological well-being can be thought of inputs in a feedback loop by which poverty may exert an influence on unhappiness and, at the same time, past low levels of general satisfaction with life may lead to economic hardship. On the one hand, while the mechanisms are still the focus of attention of current research, it has been found that stress, depression, negative affect or dissatisfaction have an influence on economic behaviours that often impede individuals to take the kind of decisions that would help them leaving poverty (Mullainathan and Shafir, 2013). On the other hand, it is natural to think that the economic condition of a household, as many other domains in life, influences individuals’ life satisfaction. While it seems obvious that poverty should necessarily be associated with dissatisfaction, behavioural economics and the tenets of ‘Prospect Theory’ teach us that individuals’ judgements depend on previous experiences and that the past can offset the present because individuals change expectations (Kahneman and Tversky, 1979).

Another concern of this research line will be the impact of poor working conditions on suicide. Poor working conditions affect subjective well-being and long term health (Fletcher, Sindelar, and Yamaguchi, 2011), which is inversely related to suicide (Daly and Wilson, 2009). We want to study empirically the relationship between job strain, mental health, and suicide. Suicide is an outcome of paramount relevance, to which economist have devoted little attention. For instance, suicide is one of the three leading causes of death among people aged 15-34 years, and it kills more people than all armed conflicts around the globe together. Our research will throw some light upon some economic factors that may shape suicide.