Feeling richer and happier? The effect of self-perceived economic welfare on life satisfaction: longitudinal evidence from a transition economy

• Published in: SN Business & Economics Vol. 3; no. 3
• Main Authors: Jin, Olivia S., Wunnava, Phanindra V.
• Format: Journal Article
• Language: English
• Published: Cham Springer International Publishing 15.02.2023
• Subjects: Business and Management; Economics; Finance; Original Article; Subjective well-being; Ordered probit; Justice; Russian longitudinal data; Self-perceived economic welfare; D63 (Equity; And Other Normative Criteria and Measurement; Transition economies; I31 (General Welfare: Well-Being); D60 (Welfare Economics: General); Life satisfaction; Inequality
• ISSN: 2662-9399; 2662-9399
• DOI: 10.1007/s43546-023-00447-y

Do you feel more satisfied with life when you think you are richer? How does the perception of your own economic welfare affect your life satisfaction? This study draws from the Russia Longitudinal Monitoring Survey (RLMS) from years 1994 to 2018 to investigate the effects of self-perceived economic welfare on subjective well-being (SWB). Moreover, we aim to better understand why life satisfaction follows the trends in income in transition economies, contradicting the Easterlin paradox. The paradox posits that an increase in income does not increase life satisfaction over time, which extant literatures have found to not hold in transition economies (Easterlin Easterlin, J Econ Behav Organiz 71:130–145, 2009; Gruen and Klasen 2012 ; Selezneva Selezneva, Econ Syst 35:139–157, 2011). Our results suggest that the way one perceives their own economic welfare is a significant determinant of life satisfaction. We suggest that the general increase in life satisfaction in Russia since the 1990s, which follows the increase in income during the time-period, is partially driven by the overall changes in perceived economic welfare as a result of the transition, as well as the vast economic and political reforms that followed.