The effect of subjective well‐being on consumption behavior

• Published date: 01 June 2022
• Author: Miha Dominko,Miroslav Verbič
• Date: 01 June 2022
• DOI: http://doi.org/10.1111/joca.12457

RESEARCH ARTICLE

The effect of subjective well-being

on consumption behavior

Miha Dominko

1

| Miroslav Verbicˇ

2

1

Institute for Economic Research,

Ljubljana, Slovenia

2

School of Economics and Business,

University of Ljubljana, Slovenia &

Institute for Economic Research,

Ljubljana, Slovenia

Correspondence

Miroslav Verbicˇ, School of Economics

and Business, Kardeljeva plošcˇad 17, 1000

Ljubljana, Slovenia.

Email: miroslav.verbic@ef.uni-lj.si

Abstract

The article studies the causal effect of subjective well-

being on the consumption behavior of individuals aged

50 and above using data from the English Longitudinal

Study of Aging (ELSA). To establish a causal link

between subjective well-being and six distinct types of

consumption (food consumed at home, food consumed

outside of home, spending on clothing, leisure con-

sumption, monthly rent, and utility consumption), it

exploits the longitudinal dimension of the dataset and

instruments for subjective well-being. The analysis

reveals that subjective well-being positively affects

spending on food outside of home and leisure activities,

while having no significant effect on the consumption

of food consumed at home, clothing, monthly rent, and

utilities. These results imply that people with higher

levels of subjective well-being are more engaged in

social and leisure activities, such as going out for din-

ner, which offers important implications for both long-

term, as well as habitual buying behavior.

KEYWORDS

consumption, economic behavior, happiness, subjective well-

being

Received: 26 March 2021 Revised: 2 March 2022 Accepted: 28 April 2022

DOI: 10.1111/joca.12457

This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs License, which permits

use and distribution in any medium, provided the original work is properly cited, the use is non-commercial and no modifications or

adaptations are made.

© 2022 The Authors. Journal of Consumer Affairs published by Wiley Periodicals LLC on behalf of American Council on Consumer

Interests.

876 J Consum Aff. 2022;56:876–898.

wileyonlinelibrary.com/journal/joca

1|INTRODUCTION

Most researchers study subjective well-being as an outcome, however, more and more scholars

are addressing the reverse causality issue and analyze subjective well-being as a cause. They

found that happy people tend to behave differently (Frank, 2000) and that higher levels of sub-

jective well-being are associated with several objective benefits, such as for example increased

longevity, productivity, and job performance (De Neve et al., 2013; Diener & Chan, 2011; Foo

et al., 2009; Kaplan et al., 2009; Riketta, 2008). Lyubomirsky et al. (2005) provide a thorough

overview of cross-sectional, longitudinal, and experimental literature examining the potential

favorable outcomes of subjective well-being. Their overview of experimental studies provides

strong support that positive affect raises sociability, activity, altruism, liking of self and others,

effective conflict resolution skills, as well as original thinking. With this article, we aim to add

to the literature studying subjective well-being as a cause by answering an empirically challeng-

ing question: Does subjective well-being affect spending on different types of products?

We place our analysis into the conceptual framework developed by Zhong and Mitchell

(2012), who hypothesize that subjective well-being influences spending on hedonic products

through the mediating effects of the positive interpenetrations of life circumstances and a

broadened set of activities. We expand upon their analysis by studying the effect of subjective

well-being on six different types of consumption. In order to do so we utilize data from the

English Longitudinal Study of Aging (from now on ELSA) on the subjective well-being of peo-

ple aged 50 and above as measured by the Satisfaction With Life Scale (from now on SWLS)

and data on monthly household consumption comprising six types of consumption. To offer

several theoretical and practical implications for the providers of products, marketers,

policymakers, and researchers we want to establish a causal link between subjective well-being

and the consumption of different types of products, rather than a mere correlation. Therefore,

we utilize the longitudinal dimension of our dataset to control for unobserved heterogeneity.

Furthermore, to appropriately address endogeneity issues we instrument for subjective well-

being. To our knowledge, the only scholar who instrumented subjective well-being in this con-

text is Guven (2012), who opted for sunshine as the instrument of choice.

In the remainder of the article, we first present the theoretical framework and our hypothe-

ses. We continue by elaborating on our research method. We then provide a descriptive over-

view of our dataset and present the empirical results. Finally, we discuss the theoretical and

practical implications, as well as some limitations of the article and potentials for further

research.

2|SUBJECTIVE WELL-BEING AND ITS DYNAMIC

RELATIONSHIP WITH CONSUMPTION BEHAVIOR

Happiness is considered the ultimate goal in life by many, and since Warner R. Wilson's (1967)

review of happiness studies in 1967, it has become an important line of research in several

fields, such as psychology, sociology, and even economics (Kristoffersen, 2010). Throughout the

years, numerous related constructs have been developed, including quality of life, life satisfac-

tion, positive affect, and subjective well-being, which conceptually overlap with the term happi-

ness (Dominko & Verbicˇ,2019a,2019b). An overview of the literature suggests that the

definition of happiness depends on the context and can mean anything from general positive

moods to living a good life, which is why some scholars tend to avoid using the term (Carlquist

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