Consumption expenditures and subjective well-being: empirical evidence from Germany

The standard of living of persons and households is not only a matter of income, but ultimately depends on the level and quality of their consumption in terms of goods and services purchased. Consumption expenditures can be regarded as the result of decisions based on the demand, preferences and limited economic resources, and are thus manifestations not only of different lifestyles, but also of inequality, affluence and deprivation. But how are different levels and kinds of consumption related to subjective well-being (SWB)? While the relationship between income and SWB has been explored in numerous studies, surprisingly little is known as yet about the association between consumption expenditures and SWB. Referring to theoretical considerations and previous research, this article focuses on the empirical analysis of how and to what extent SWB—in terms of life satisfaction—is affected by the level and structure of consumption expenditures in German households. The analysis is based on the data from the German Socio-Economic Panel Study, which for the first time in 2010 included a module on consumption expenditures. The results of our analysis demonstrate that life satisfaction increases with increasing consumption expenditures, but the findings also suggest that persons in the lowest decile of consumption expenditures turn out to be less unsatisfied with their lives than persons in the lowest income decile. Moreover, our research provides evidence to suggest that low levels of spending resulting from voluntary decisions do not reduce life satisfaction at all. Finally, the paper also points out the ways in which SWB is affected by particular kinds of consumption expenditures. It appears that expenditures on clothing and leisure are drivers of SWB, while expenditures on food and housing—which may be considered more demand driven—do not affect life satisfaction significantly. © 2014, Springer-Verlag Berlin Heidelberg.