The effect of economics on the subjective well-being of people has been studied by treating country information in the same way as data from individuals. The objective of this chapter is to analyze 17 Latin American countries with data from 2016 by including both effects handled into two different levels. This work contributes to extend the current debate regarding the impact of economics on subjective well-being of people by applying the multilevel method. Some of the findings revealed that both the individual economic situation as well as the welfare state and the rule of law of a country generate effects on subjective well-being. Similarly, the effect of interaction between some variables was analyzed, and it was concluded that people with great economic difficulties have a stronger relationship with subjective well-being in areas of higher government spending and higher tax burden.
TopIntroduction
The present pandemic has changed the perspective of people regarding well-being, by increasing the value that is given to it. Individuals are appreciating all the time more their physical, as well as mental and psychological condition, after two years of living with the presence of a virus that has threatened the survival of mankind and has modified life styles and human interactions and with no end in sight for the mutating COVID 19.
For this reason, it is of utmost importance to analyze the effects that economic variables have had in well-being. Among the studies that link economy to the subjective well-being of people, several researchers have been interested in how the latter is affected by people's income (Lea, Webley & Levine, 1993; Easterlin, 2001; Frey & Stutzer, 2002; Schyns, 2002; Helliwell, 2003; Alesina, Di Tella & MacCulloch, 2004; Gasper, 2005; Binswanger, 2006).
On the other hand, several other authors have focused on analyzing the effect of variables at the country level on subjective well-being, such as Hayo and Seifert (2003); Alesina et al. (2004); Sanfey and Teksoz (2007); Bjørnskov, Dreher and Fischer (2007); Di Tella and MacCulloch (2008); Shahbaz and Aamir (2008); Dluhosch and Horgos (2013); Powdthavee, Burkhauser and De Neve (2017); Brzezinski (2019) to name a few. That is, economically speaking there are influences at the individual level and at the country level. However, the vast majority of jobs use single-level methodologies, and disaggregate macroeconomic data at an individual unit level. Or, the authors carry out the analysis at the individual level and omit the context in which mentioned individuals live. The first case may present problems of self-correlation, and the second case of omission of important contextual effects. And both options lead to argumentation errors based on the misinterpretation of statistical results.
Objective and Contributions
The objective of this work is to analyze the subjective well-being in Latin America, by considering the repercussions that the individual economic condition, diverse macroeconomic variables and the effect of the interaction between them could have on it.
The novel finding of the current work aims to contribute by taking into account variables at the individual level and context level, as well as their interaction effect, by using a model that considers in an adequate way the nature and level of every variable. Additionally, studies of Latin America regarding subjective well-being are scarce. As well, these countries are interesting since they have the peculiarity of keeping a certain cultural similarity, and at the same time they can show marked differences in terms of political and economic indicators.
The models that will be used in the present work will be multilevel, since they allow to involve different independent variables at more than one level. This is important because it offers a way to evaluate the effect on well-being in a more adequate way that takes into consideration the structure of data, and in consequence it turns out to be a more robust measurement. Therefore it will have results that reflect more closely what happens in reality, what could be useful in terms of creating public policy more accurate for bringing well-being to citizens in general.
Firstly, the antecedents of subjective well-being and its link with the welfare state are described, in order to then review the empirical literature. Subsequently, the multilevel technique is explained, then a description of the data is made, followed by the presentation and analysis of the results. Finally, the conclusions and limitations of the study are shown.