The Strength of the Causal Relationship between Living Conditions and Satisfaction

Abstract

This article attempts to explicate the subjective variable satisfaction with life in general by means of the objective variable income. The reason for this study is that, so far, the objective living conditions have been found to have little effect on the subjective feelings of people. Several different approaches have been used to estimate the strength of this relationship. First, correction for measurement errors was tried, then an alternative formulation of the relationship was tested using difference scores instead of the original variables. Next, nonlinear relationships between these variables were introduced. None of these methods led to any substantial strengthening of the relationship. Finally, a model was tested controlling for lagged variables and correcting for measurement errors in a panel design. The combination of these changes led to a considerable effect of the objective variable on satisfaction. This article shows how biased estimates of relationships can be. A specific combination of approaches led to a fundamentally different result.