Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/106529 
Year of Publication: 
2014
Series/Report no.: 
IZA Discussion Papers No. 8589
Publisher: 
Institute for the Study of Labor (IZA), Bonn
Abstract: 
We discuss and compare five measures of individual well-being, namely income, an objective composite well-being index, a measure of subjective well-being, equivalent income, and a well-being measure based on the von Neumann-Morgenstern utilities of the individuals. After examining the information requirements of these measures, we illustrate their implementation using data from the German Socio-Economic Panel (SOEP) for 2010. We find sizeable differences in the characteristics of the individuals identified as worst off according to the different well-being measures. Less than 1% of the individuals belong to the bottom decile according to all five measures. Moreover, the measures lead to considerably different well-being rankings of the individuals. These findings highlight the importance of the choice of well-being measure for policy making.
Subjects: 
von Neumann-Morgenstern utility function
equivalent income
life satisfaction
composite well-being index
income
worst off
Germany
JEL: 
D31
D63
I30
Document Type: 
Working Paper

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