Deprivation and Subjective Well-being: Evidence from Panel Data

This paper uses data from the 2000-2008 waves of the German Socio-economic Panel dataset (GSOEP) to provide first estimates of the impact that deprivation in various life domains has on individual well-being. Using a deprivation index proposed by Bossert et al. (2007) and a random effects model extended to include a Mundlak term and explicit controls for the respondents’ personality traits, the paper shows that people care about social comparison information in a number of domains, not just income. Using an equivalent income approach, the paper shows that in terms of well-being a moderate deterioration of the individual position in the income distribution is as important as a 33.5% decrease in own income. This monetary equivalent amounts to an income variation of between 25% and 43% when it comes to other deprivation domains, including durables, accommodation, health and social relations. These results recommend that in the fight against social exclusion (i.e., deprivation in a number of domains), more emphasis should be directed to these non-income despite well-being-relevant dimensions.