Individual Wellbeing in a Dynamic Perspective

Abstract

We explore the determinants of individual wellbeing as measured by self‐reported levels of satisfaction with income and life. Making use of the German Socio‐Economic Panel, we provide empirical evidence for wellbeing depending on absolute and relative income levels in a dynamic framework where status and signal effects play a role. This finding holds after controlling for other factors in a multivariate setting. The main novelty is the consideration of dynamic aspects: the individual's own history and the relative income performance with respect to other society members play major roles in the assessment of individual wellbeing.