Poverty Reduction and Economic Management Network

Subjective Well-Being in Colombia: Some Insights on Vulnerability, Job Security, and Relative Incomes

ABSTRACT

A burgeoning literature explores the extent to which consumption or income inadequately reflect people's subjective well-being, just as GDP at times can provide an incomplete and misleading picture of national well-being. Scholars are increasingly using data on subjective well-being to complement traditional welfare indicators and to enrich our understanding of well-being and quality of life. The paper builds on the present research but it analyzes a much broader, more interdisciplinary, and more policy-relevant range of potential determinants simultaneously than currently existing in the literature on subjective well-being. It first analyzes the relative importance of a wide range of characteristics and conditions at the individual, household, regional and macro levels on levels of subjective well-being in Colombia in 2010/11; and second, assesses the marginal effects of a number of factors on perceived changes in levels of subjective well-being over time for the same respondents from 2008/09 to 2010/11. Findings show that increasing the quality of life of Colombians is largely conditional on minimizing risks and vulnerabilities: reducing the rate and duration of unemployment; improving the delivery of public health services; increasing the share of people with health and pension plans; enhancing safety and security in communities; and reducing levels of discrimination. It finds that job loss has particularly strong effects on levels of satisfaction that are larger than those for increased income, while also controlling for a decrease in income that is often related to being unemployed, suggesting that the human welfare (non-pecuniary) costs of unemployment are driving the strong effects. Moreover, any job, even a low-quality job, is overall better for one's subjective well-being than being unemployed. Finally, policy aimed at improving people's subjective well-being will likely have the greatest impact if focused on mitigating vulnerabilities and negative shocks that people face.