Requiem for a Dream: Perceived Economic Conditions and Subjective Well-Being in Times of Prosperity and Economic Crisis

Abstract

Using the Panel of Social Inequalities in Catalonia, Spain (PaD 2001–2012), this article investigates the relationship between perceptions of economic conditions and subjective well-being in times of prosperity and economic crisis. It also analyses how this relationship plays out across different social backgrounds. Periods of economic crisis and prosperity serve as a proxy for objective macroeconomic conditions. The Spanish region of Catalonia is a relevant setting because it faced one of the highest increases in inequality and unemployment in Europe as a result of the 2008 Economic Crisis. Our results show that perceived economic conditions matter beyond objective micro and macroeconomic realm and become a strong determinant of subjective well-being during a crisis, particularly for the middle class. However, contrary to our initial expectations, our results also show the existence of a close correlation between perceptions of economic conditions and subjective well-being for low social background individuals in times of economic prosperity, and an even stronger relationship in times of economic crisis. The article stipulates several potential explanations for these results.