Household Arrangements and Economic Poverty: A Subjective Well-Being Approach The Family’s Role in Poverty Abatement Mariano Rojas Universidad de las Américas, Puebla, Mexico International Conference on Multidimensionality of Poverty Brasília, 29-31 August, 2005 International Poverty Centre

Introduction Two main purposes: Presentation Show the usefulness of the subjective well-being approach for the study of poverty Well-being conception of poverty Show an application: Estimation of an equivalent income in Mexico useful for well-being comparisons useful for well-being inference from income Presentation The SWB approach Household Arrangements Intra-household arrangements

The SWB Approach The well-being as declared by the person Happiness and Life Satisfaction conceptions The well-being of a person Of flesh and blood and in her circumstance Person as the authority to judge her well-being A person’s well-being is essentially subjective Inferential methodology To identify relevant explanatory factors Bottom-up rather than a doctrinal –top-down- one Transdisciplinary issue Interdisciplinary study

Human and Economic Poverty Domains of life literature Persons being human in many concrete areas of being Life satisfaction / happiness emerging from satisfaction in all these domains Not all domains are equally important for swb Defining the domains of life

Well-Being Health Economic LIFE SATISFACTION or HAPPINESS Job Family X P L F A C T O R S Job Family Friends Personal Community

The Database Data for estimations come from: Survey in central Mexico Five states plus Mexico City November, 2001 1540 questionnaries properly answered Designed to address many subjective well-being issues Financial support from CONACYT, Mexico Limitations Cross-section Persons rather than families as units

Human and Economic Well-Being Table 3 Life Satisfaction and Satisfaction in Domains of Life CES specification Coefficient Asymp.Prob>t α-Health 0.074 0.07 α-Economic 0.044 0.12 α-Job 0.059 α-Family 0.107 0.09 α-Friendship -0.014 0.25 α-Personal 0.067 α-Community 0.000 0.50 ε 0.525 0.00 σ 1.108 0.01 R-squared 0.334

Well-Being Health Economic LIFE SATISFACTION or HAPPINESS Job Family Friends Personal Community

Human and Economic Well-Being Economic satisfaction is not a main determinant of life satisfaction There is more in life than the standard of life But it is a relevant factor We can concentrate in the study of the economic domain Use the SWB approach to estimate equivalent incomes useful for economic well-being comparisons Well-being comparison of persons living under different household arrangements Does The Family matter? Per capita vs equivalent income

Household Arrangements and Economic Well-Being Household equivalent incomes: How much income does a person living in a n-member household needs to have the same ‘utility’ than a person living alone? n times, more than n times, less than n times Comparisons across families with different arrangements within and across countries Relevance for income-based poverty rates with an economic well-being referent

Household Arrangements and Economic Well-Being A SWB approach to equivalence scales estimation: Leyden School: van Praag and others Required change in income to keep a person’s utility constant as her household size increases Life satisfaction/happiness as utility Economic satisfaction as utility Economic satisfaction variable Four satisfaction questions Income satisfaction Purchasing power satisfaction Housing satisfaction Financial situation satisfaction Satisfaction scale: 1 to 7 verbal ordinal Factorial analysis, principal components extraction to obtain new variable. 1 to 7 scale.

Household Arrangements and Economic Well-Being

Household Arrangements and Economic Well-Being

Household Arrangements and Economic Well-Being Table 8 Alternative Equivalence Scales and their Overestimation of Equivalent Income One-member household as reference Household Age Composition* SWB Scale Oxford Scale Per capita Scale Single 1.00 Couple 1.39 1.70 2.00 Couple & 1 child 1.80 2.20 3.00 Couple & 2 children 2.13 2.70 4.00 Couple & 3 children 2.40 3.20 5.00 Couple & 4 children 2.65 3.70 6.00 Couple & 3 children & 1 extra-adult person 2.58 3.90 Couple & 3 children & 2 extra-adult persons 2.74 4.60 7.00 * teenagers were not considered because Oxford scale does not make such a distinction.

Household Arrangements and Economic Well-Being Implications for economic poverty ENIGH-2002 Estimation for the whole Mexican Population Table 13 Percentage of Persons beneath a Monthly Equivalent Income in Mexico according to different equivalence scales Per Capita Scale Oxford Scale SWB Scale Beneath MN$300 5.86 1.83 0.41 Beneath MN$600 22.05 10.60 4.06 Beneath MN$900 37.54 21.91 10.26 Beneath MN$1500 61.17 42.91 25.43

Intra-Household Arrangements and Economic Well-Being Is equivalent income a good economic well-being proxy for every member in a household? Intra-household arrangements Theories of the family Communitarian/Altruistic Individualistic - Cooperative bargaining Family status: Father, mother, son, daughter, grandparent, other. Breadwinning status: Main, secondary, marginal, other (no) Proportion of household income generated by person Does it make a difference for economic satisfaction? Controlling for other variables

Conclusion Calculation of a household equivalent income useful for economic well-being comparisons Assessing poverty with an income indicator that has a well-being referent Being able to take into consideration different household arrangements across families and across countries. Inference for the whole family The Family An important role in poverty abatement (more economic satisfaction from the same per capita income) As long as: Substantial economies of scale Communitarism/altruism Specific household arrangements SWB approach can make many contributions to poverty research Poverty conceptualization Human poverty, economic poverty