In recent years, a small number of studies have emphasized that subjective well-being of individuals depends not only on income but also consumption and wealth. However, only a few have examined the influence of all three variables simultaneously. Empirical studies have also analyzed the role of self-centered and community-centered inequalities but the inclusion of both measures in the same specification is scarce. In a departure from much of the existing literature,
this paper analyzes concurrently the influence of all three economic well-being indicators and both types of inequalities on subjective well-being. We find that absolute levels of income, consumption and wealth all have a significant positive effect that remains robust even after the inclusion of self-centered and community-centered inequalities in the regression equations. The evidence indicates that both types of inequalities are important considerations for subjective well-being, but with different influences. Self-centered inequality measured using reference group average has a positive signalling effect, while inequality defined by the position of an individual within the distribution of the relevant economic well-being indicator has a negative comparison effect. Whereas community-centered inequality in income has a positive signalling effect, consumption and wealth inequalities have a negative comparison effect.
Biswajit Banerjee,
