Technological affluence and subjective well-being

https://doi.org/10.1016/j.joep.2011.05.004Get rights and content

Abstract

This study measures the welfare effects of technological goods using a recent European pooled cross-sectional dataset. We find that fixed and mobile phones, music players and personal computers, including those with an Internet connection, are associated with significantly higher levels of well-being measured by individual self-reported life satisfaction. Further controlling for mobile and broadband country penetration levels, we provide evidence suggesting that the latter matters for life satisfaction, especially for the users who already possess the relevant devices. Keeping life satisfaction constant, we subsequently derive substantial GDP per capita estimates equivalent to a 10 percentage point increase in broadband and mobile phone penetration.

Highlights

► We study the welfare effects of ownership of technological goods in Europe. ► Device ownership is largely associated with higher levels of subjective well-being. ► Mobile and broadband penetration also matter, especially for relevant device owners. ► Increases in technological adoption have sizeable equivalent gains in GDP per head.

Introduction

Technology is now an integral part of everyday life. While the economic dimensions of technological amenities have been studied extensively, the literature has largely neglected the individual welfare effects from their existence or lack thereof. Not long ago, before the invention of the television, being able to watch movies or other programmes through a simple device in your living-room was considered absurd, even more so being able to make and receive calls via a wireless device from wherever one may be, or ‘surf’ the internet.

Following Scanlon (1993) we study whether an individual’s well-being is enhanced due to the ownership of such technological amenities, which in this setting can be viewed as substantive goods. Scanlon himself purposefully avoids determining the characteristics of such a good, which is defined as anything that humans desire and are given to be ‘good things’. Thus, a substantive good is “anything that makes people’s lives go better” given their own or other people’s perceptions and experiences (Harsanyi, 1997). In addition, the purchase and ownership of technological amenities may be mirroring a desired status effect for the individual, as noted by Veblen (1899).

Given some of the inadequacies of revealed preferences and contingent valuation methods (Luechinger & Raschky, 2009), we use cross-national individual life satisfaction data obtained from the Eurobarometer over the period 2005–2008 and relate it to the ownership of several technological appliances. These include televisions, digital videodiscs, compact disk players, personal computers, internet connections, fixed and mobile phones. Besides this level of comparative ownership, several network technological products and services are related to their stock and usage in each country. Mobile and fixed phones are useful if each person’s peers own a device, whereas a television set is unrelated to this phenomenon. Analog or digital fixed internet access is also related to the overall country penetration that allows for tele-work, e-banking and e-shopping activities, among others. We thus additionally incorporate controls for network amenities and draw inferences on the well-being effects of increased participation.

By focusing on the under-researched link between increased participation in digital networks and subjective well-being (SWB), we find a significantly higher degree of life satisfaction for individuals who possess relevant amenities and reside in countries with higher penetration rates (i.e. digital network participation in a country). We further estimate that the GDPC equivalent of a 10 percentage point increase in mobile and broadband penetration on SWB is 2.36% and 2.89%, respectively. By further computing the annual broadband subscription costs incurred by the average consumer as a percentage of GDP per capita, we find a welfare surplus calculated as the differential between the implied monetised benefits and actual costs. The results pose some interesting links that may directly or indirectly affect public policy debates on net neutrality and the European Parliament’s acknowledgment of internet access as a fundamental right. 1

The remaining of this study is organized as follows: Section 2 introduces the key literature related to the economic impact of technology together with an overview on the economics of SWB. Section 3 describes our data and the econometric methodology. Section 4 presents the results of our model. Section 5 offers some discussion on the implications of our results, policy impacts and limitations. Section 6 concludes.

Section snippets

Technology, innovation and growth

The economics of technology literature has primarily focused on the measurable returns of public or private technological infrastructure on economic growth, productivity, country competitiveness, imports and exports. Hardy (1980) was the first to look at the importance of fixed phone ownership on economic development. Using a broader dataset Roeller and Waverman (2001) study the economic impact of fixed telephony on growth and find significant returns for high penetration countries. Cronin,

Data and econometric methodology

In order to estimate the correlation between the ownership of various technological amenities and subjective well-being (SWB), we gather data from the Eurobarometer Survey Series, a large public opinion survey carried out in European and potential accession countries. We focus on Eurobarometer 63.4, 65.2, 67.2 and 70.1, spanning over the period 2005–2008, inclusive. These surveys ask individuals whether they own a television (TV), digital video disk player (DVD), compact disk music player (CD),

Results

This section presents the results of our analysis. See Table A1, Table A2 in the Appendix A for some descriptive statistics.

The results of the baseline LS regression based on individuals’ ownership of technological amenities are presented in Table 1. We find that most technological goods are associated with significantly higher reports of LS. For example, a fixed telephone enters the LS equation significantly, with a positive coefficient indicating that LS from fixed phones increases by 5.8%.

Implications

In this section we offer some implications of our results. First, we focus on the micro associations between technological goods and well-being. Second, we offer some implications regarding the macro associations between technological investment and well-being.

On the micro implications, we first need to tackle the issue of causality. For example, do computers increase life satisfaction or do individuals with higher life satisfaction purchase computers? Although it is not possible to provide a

Conclusion

Following the widespread use of technological devices, this study measures the welfare implications of ownership of technological goods and the intangible impact of mobile and broadband networks to subscribers using a recent pooled cross-sectional dataset for 29 European countries.

Using self-reported life satisfaction as a measure of well-being we find that ownership of a fixed phone, a mobile phone, a compact disk player, a computer and an internet connection are all associated with

Acknowledgments

The authors thank Paul Dolan, Robert MacCulloch, Robert Metcalfe, Andrew Oswald, Nattavudh Powdthavee, Alois Stutzer, Stefan Szymanski, Tommaso Valletti and two anonymous referees for valuable comments and suggestions on earlier drafts of this study.

References (32)

  • A. Clark et al.

    Relative income, happiness, and utility: An explanation for the Easterlin paradox and other puzzles

    Journal of Economic Literature

    (2008)
  • E. Diener

    Subjective well-being

    Psychological Bulletin

    (1984)
  • Dolan, P., Metcalfe, R., Powdthavee, N., Beale, A., & Pritchard, D. (2008a). Innovation and well-being. Innovation...
  • R. Easterlin

    Building a better theory of well-being

  • P. Ekman et al.

    The Duchenne smile: Emotional expression and brain physiology ii

    Journal of Personality and Social Psychology

    (1990)
  • A. Ferrer-i-Carbonell et al.

    How important is methodology for the estimates of the determinants of happiness?

    Economic Journal

    (2004)
  • Cited by (65)

    • Environmental degradation and life satisfaction: Do governance and renewable energy matter?

      2022, Technological Forecasting and Social Change
      Citation Excerpt :

      So, the relationship between unemployment and life satisfaction is expected to be negative. Information and communication technology (ICT): As recent studies on ICT show, the internet, and mobile phones are used as indicators to measure ICT (Kavetsos and Koutroumpis, 2011; Pénard et al., 2013). These studies show a positive relationship between ICT and life satisfaction.

    • The impact of internet access on research output - a cross-country study

      2021, Information Economics and Policy
      Citation Excerpt :

      Empirical evidence has shown the positive relationship between Internet access and economic growth (Arvin and Pradhan, 2014; Czernich et al., 2011; Holt and Jamison, 2009; Jiménez et al., 2014; Kolko, 2012; Koutroumpis, 2009). Other social-economic benefits brought by the Internet include enhancing subjective well-being (Kavetsos and Koutroumpis, 2011; Pierewan and Tampubolon, 2014), reducing unemployment (Hjort and Poulsen, 2019; Jayakar and Park, 2013), and increasing labor productivity (Mack and Faggian, 2013; Najarzadeh et al., 2014). Research has also found that Internet use may facilitate knowledge generation and diffusion (Cowan and Jonard, 2004; Fadul, 2014; Pachi et al., 2012).

    View all citing articles on Scopus
    View full text