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Measuring welfare: latent variable models for happiness and capabilities in the presence of unobservable heterogeneity

Anand, Paul; Krishnakumar, Jaya and Tran, Ngoc Bich (2011). Measuring welfare: latent variable models for happiness and capabilities in the presence of unobservable heterogeneity. Journal of Public Economics, 95(3-4) pp. 205–215.

DOI (Digital Object Identifier) Link: http://dx.doi.org/10.1016/j.jpubeco.2010.11.007
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Abstract

The paper contributes to the operationalisation of the capabilities approach to welfare economics by developing and analyzing data on the freedoms of adults in Argentina. Specifically, it reports on the development and delivery of a survey instrument for measuring capabilities, calculates for each respondent a Nehring–Puppe type index of capabilities and examines the distribution of index scores. The main analytic part of the paper then goes on to develop a generalized linear latent and mixed model (GLLAMM) for assessing the impact of capabilities on life satisfaction, in which allowance is made for (i) unobserved heterogeneity and (ii) possible endogeneity, by introducing latent individual effects and by instrumenting capability variables using income and other socio-economic variables. Our empirical results show that empathy, self-worth, goal-autonomy, discrimination, safety and stress are statistically significant determinants of life satisfaction, in a decreasing order of importance. The paper concludes by suggesting that, if replicated, the findings have profound implications for the conceptualisation and evaluation of economic progress.

Item Type: Journal Article
Copyright Holders: 2010 Elsevier B.V.
ISSN: 0047-2727
Project Funding Details:
Funded Project NameProject IDFunding Body
Not SetNot SetAHRB
Keywords: capabilities; freedoms; GLLAMM; happiness; instrumental variables; multi-dimensionality; unobserved heterogeneity
Academic Unit/Department: Social Sciences > Economics
Interdisciplinary Research Centre: Innovation, Knowledge & Development research centre (IKD)
Item ID: 29183
Depositing User: Paul Anand
Date Deposited: 28 Jul 2011 08:57
Last Modified: 24 Oct 2012 15:19
URI: http://oro.open.ac.uk/id/eprint/29183
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