# **1. Introduction**

Subjective measures of well-being can capture dimensions of welfare that go beyond a narrow focus on consumption or income (Layard, 2005). There is increasing interest among academics and policymakers in developing measures of development and societal progress that capture the multifaceted nature of well-being<sup>2</sup> , in order “to shift emphasis from measuring economic production to measuring people’s well-being” (Stiglitz, Sen and Fitoussi, 2009).<sup>3</sup> A growing literature has established strong correlations of measures of happiness or satisfaction with life with income, health, marriage and employment.

Yet, issues of salience<sup>4</sup> , framing and scaling of subjective well-being measures, as well as the challenges in interpreting various types of well-being measures remain and need to be given careful consideration when employing such data to measure well-being over time, across space or population groups, or for policy evaluation. Ferrer-i-Carbonell (2005) notes that unobserved factors like personality traits can have a significant effect on subjective well-being. Lucas and Diener (2008) find that “correlations between subjective well-being and personality characteristics such as extraversion and neuroticism are stronger than correlations with any demographic predictor or major life circumstance that has been studied so far.” Also, Kahneman and Krueger (2006) note that subjective well-being measures have been found to be affected by the weather or trivial events such as finding a dime, and that in studies that collected repeated measures of subjective well-being over short periods of time these exhibited lower correlations across test-retest rounds than other variables like levels of education or earnings (Schwarz and Clore 1983, Lucas, Diener and Suh 1996). Last, Deaton (2011) cautions us that the ‘best possible life’ evaluations in the daily Gallup Poll appear to be affected more by Valentine’s day than by the doubling of unemployment in the United States.<sup>5</sup> On the other hand, subjective well-being measures have been shown to exhibit consistent patterns across surveys and regions. For instance, Diener et al. (1995) examined four subjective well-being surveys in a total of 55 countries with a combined population of 4.1 billion people and a total survey sample of 100,000 respondents, and found “strong covariation among surveys, despite different years, sample populations, wording, and response formats." Using data from the first three waves (2006-2008) of the World Gallup Poll, Helliwell et al. (2009) find that international differences in life evaluations are due to differences in life circumstances rather than differences in structural relations between circumstances and life evaluations. As they note, the “[a]pplication of the same well-being equation to 125 different national societies shows the same factors coming into play in much the same way and to much the same degree.” In other words, international differences in subjective well-being are found not to be driven by different

> 2 Frey and Stutzer 2002, Dolan 2006; 2011; Graham 2010.

> 3 Subjective assessments of welfare began to be included in the World Bank’s Living Standards Measurement Study (LSMS) surveys in 1993.

> 4 For instance, the possibility that the respondent may be influenced by the preceding questions, or by the type of organization implementing the survey (see Dolan 2011).

> 5 In fact, subjective well-being data have been found to be reasonably stable over time, although the degree of stability is somewhat lower for life satisfaction measures than for measures of affect (Lucas and Diener 2008). This stability is partly the result of stable personality traits, and partly the result of adaptation to events.

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