The Impact of Wealth on Subjective Well-Being: A Comparison of Three Welfare-State Regimes

Abstract

This study provides new insight on subjective well-being (hereafter SWB) and its association with individuals’ objective economic standing. In particular, we are interested in how one’s relative position in the distribution of wealth influences his or her general satisfaction with life (hereafter GLS), representing the cognitive and most stable dimension of SWB. Most studies on the relationship between economic standing and SWB have used income as an indicator of economic standing. Yet, income seems to account for only a small part of the variation in SWB (e.g. Diener, Sandvik, Seidlitz & Diener 1993). In addition, income is restricted to a certain time interval (income per week, per month, or per year) and, to periods of labor market activity. Recent studies thus argue that other measures of economic standing such as socioeconomic status, deprivation, and wealth, might be more useful for understanding its relationship with SWB (e.g. Christoph 2010). Wealth is a stock Graph accumulated throughout a person’s life course. Additionally, in contrast to earned income, which requires time, effort, and working ability, wealth offers access to capital and goods independent of individual investment and ability, for example, through intergenerational transfers (Elmelech 2008). Wealth may also be a better indicator of an individual‘s long-term consumption potential (Spilerman 2000). Considering the unique properties of wealth, we see it fit to measure the consequences of economic standing to SWB, over and above the consequences income may have on it. A second contribution of this study is the focus it places on macro-level factors, and specifically, state-level welfare systems. The relevance of the welfare-state system to the relation between wealth and SWB is best explained through the concept of decommodification, referring to the extent to which citizens in a country are economically independent from the market through the provision of social benefits. These benefits can be understood as a cushion against the consequences of shortage of financial resources (Pacek & Radcliff 2008). Because the extent to which these benefits are provided by the welfare-state strongly differs between the three regimes, we predict that the association between wealth and SWB will also differ.