Multidimensional Poverty Index and Happiness

Abstract

In recent years, income concepts have been criticized for being too narrow to capture human well-being. The broader “objective” capability approach and subjective well-being analyses have been highlighted as most prominent approaches which allow for well-being assessments beyond income. Recently, a combination of the capability and of the subjective well-being approach has been recommended to strengthen well-being analyses. Our paper further explores the relations of both approaches. Based upon micro data covering more than 2300 individuals from four villages in rural Karnataka (India), the paper empirically analyses to which degree objective capability deprivation reflected by the United Nations Development Programme’s Multidimensional Poverty Index coincides with reduced happiness. We find positive correlations between Multidimensional Poverty Index deprivation and lack of happiness for some dimensions; otherwise the correlation is weak for the majority of Multidimensional Poverty Index indicators. Our results suggest that “relativity” towards other villagers is crucial for happiness. Moreover, from a happiness perspective our findings show the necessity to integrate financial deprivation indicators and further “missing dimensions” of deprivation into the Multidimensional Poverty Index. Furthermore, it may be fruitful to measure multidimensional poverty on a household and individual level.