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The Determinants of Subjective Economic Well-being: An Analysis on Italian-Silc Data

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Abstract

Using Italian data on Income and living conditions for the year 2005, the paper investigates the main determinants of households’ subjective economic well-being by means of a Partial Proportional Ordered Logit Model. According to a joint subjective and objective perspective of analysis, we use as dependent variable the perceived ability of households to make ends meet. Whereas, we use as explanatory variables some objective aspects of living conditions relating to housing, financial equilibrium, possession of durables and quality of residence place and some socio-demographic characteristics. The empirical results show that the financial strain is the most relevant dimension of living conditions influencing the subjective economic well-being, but its effect is attenuated depending on the level of education and the tenure status of accommodation. Actually, when the highest levels of education are coupled with the status of self-employee and house-owner households have more chances to reach a higher probability to be economically satisfied. The insights coming out from the results may call for different policy measures depending on the degree of well-being and the characteristics of households. In particular, more efficient policies would be oriented to sustain the households’ income, to encourage to buy a house and to allow young people to get the highest levels of education.

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Notes

  1. The S-Gini Index, as a measure of heterogeneity of the distribution for qualitative variables, is a standardized index ranging from 0 (low heterogeneity) and 1 (high heterogeneity).

  2. The parallel-lines constraint is satisfied if β 1 = β 2 = … = β M .

  3. To check the parallel-lines constraint the autofit option of gologit procedure of STATA software was followed. This STATA procedure does a series of Wald tests on each variable to see whether its coefficients differ across equations, e.g. whether the variable meets the parallel-lines assumption. If the Wald test is statistically insignificant for one or more variables, the variable with the least significant value on the Wald test is constrained to have equal effects across equations. A global Wald test is also done of the final model with constraints versus the original unconstrained model; a statistically insignificant test indicates that the final model does not violate the parallel-lines assumption.

  4. We explored the effect of regional location by using different aggregations of data; for example, North, Centre, South or North-Centre and South. In these cases, the coefficients of AREA were not statistically significant.

  5. Regarding to the other explanatory variables, the median value has been considered; this choice seems the most appropriate considering the nature of the data.

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Correspondence to Maria Francesca Cracolici.

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Cracolici, M.F., Giambona, F. & Cuffaro, M. The Determinants of Subjective Economic Well-being: An Analysis on Italian-Silc Data. Applied Research Quality Life 7, 17–47 (2012). https://doi.org/10.1007/s11482-011-9140-z

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