Assessing the Income and Subjective Wellbeing Relationship Across Sub-national Developmental Contexts

Previous studies investigating the effect of income on subjective wellbeing (SWB) have seldom accounted for the role of sub-national regional developmental context in determining the absolute and relative income effect on individual SWB. Given the varying levels of socio-economic development across regions within a country, a priori expectations point to the income and SWB relationship being contingent on the regional context. This study was conducted in the South African context using the National Income Dynamics Study datasets and municipal panel data with multilevel regression models to account for both municipal and individual level characteristics. The study finds that both absolute and relative income are significant predictors of SWB in both the developed and underdeveloped contexts. The absolute income effect is muted in low socioeconomically developed context in comparison to their more developed counterparts, explained by a non-monetized system of production and consumption in the less developed contexts. However, the relative income gradient on individual SWB, was found to be stronger in less developed municipalities and is explained by much narrower but stronger reference group formation in less developed municipalities than in more developed ones.