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Economic Welfare and Subjective Assessments of Financial Situation of European Households

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  • Malgorzata Grzywinska-Rapca

Abstract

Purpose: This work presents a model of the relationship between subjective assessments of the financial situation of domestic households and financial well-being expressed in actual consumption and saving levels. Design/Methodology/Approach: The research was conducted through a detailed analysis of changes in subjective assessments of the financial situation of households in particular periods. Confirmatory factor analysis was used for formal empirical verification. Modeling was preceded by a k-means grouping of European countries and reduced variables by analyzing the main components. Findings: Subjective assessments of household finances are of varying strength but significantly correlated with consumption and saving in different clusters of European countries. The CFA model presented considers the personal effects of countries and explains the volatility of household financial behaviors. Practical implications: One of the new results is that subjective assessments of household finances are of varying strength but significantly correlated with consumption and saving in different concentrations of European countries. The identification of household financial assessment factors was carried out based on a survey covering all European Union countries and the United Kingdom, i.e., 28 countries. Originality/Value: The CFA model presented considers the personal effects of countries and explains the volatility of household financial behavior. Finally, the article contributes to the literature on personal feelings and financial decisions of households.

Suggested Citation

  • Malgorzata Grzywinska-Rapca, 2021. "Economic Welfare and Subjective Assessments of Financial Situation of European Households," European Research Studies Journal, European Research Studies Journal, vol. 0(2 - Part ), pages 948-968.
    • Handle: RePEc:ers:journl:v:xxiv:y:2021:i:2-part1:p:948-968
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    References listed on IDEAS

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    1. Waqas Ali & Rehman Javaid & Shujahat Ali3 & Yasir Akram & Ayaz Ul Haq, 2019. "Infl Uence Of Life Events On The Financial Satisfaction Of Individuals," IBT Journal of Business Studies (JBS), Ilma University, Faculty of Management Science, vol. 15(1), pages 15-10.
    2. Waqas Ali & Rehman Javaid & Shujahat Ali3 & Yasir Akram & Ayaz Ul Haq, 2019. "Infl Uence Of Life Events On The Financial Satisfaction Of Individuals," IBT Journal of Business Studies (JBS), Ilma University, Faculty of Management Science, vol. 15(1), pages 123-137.
    3. Aitken, Andrew, 2019. "Measuring Welfare Beyond GDP," National Institute Economic Review, National Institute of Economic and Social Research, vol. 249, pages 3-16, August.
    4. Ulrich Witt, 2017. "The evolution of consumption and its welfare effects," Journal of Evolutionary Economics, Springer, vol. 27(2), pages 273-293, April.
    5. Jing Xiao & Cheng Chen & Fuzhong Chen, 2014. "Consumer Financial Capability and Financial Satisfaction," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 118(1), pages 415-432, August.
    6. Paul Gerrans & Craig Speelman & Guillermo Campitelli, 2014. "The Relationship Between Personal Financial Wellness and Financial Wellbeing: A Structural Equation Modelling Approach," Journal of Family and Economic Issues, Springer, vol. 35(2), pages 145-160, June.
    7. Daniel M. Bartels & Oleg Urminsky, 2015. "To Know and to Care: How Awareness and Valuation of the Future Jointly Shape Consumer Spending," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 41(6), pages 1469-1485.
    8. Andrew Aitken, 2019. "Measuring Welfare Beyond GDP," National Institute Economic Review, National Institute of Economic and Social Research, vol. 249(1), pages 3-16, August.
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    More about this item

    Keywords

    Economic welfare; subjective assessments; households; consumption; saving.;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G50 - Financial Economics - - Household Finance - - - General

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