Measuring financial well-being in Europe using a fuzzy set approach

Abstract

Purpose: This paper aims to apply a multidimensional approach to assessing the financial well-being of European countries. Design/methodology/approach: Financial well-being is a very complex phenomenon to measure because it is composed of different dimensions. Therefore, this paper uses a multidimensional and fuzzy methodology to assess financial well-being in Europe. The financial well-being fuzzy indicator was calculated using European Quality of Life Survey data. Findings: Financial well-being is heterogeneous across European countries. This evidence is confirmed both at the level of overall financial well-being and at the level of sub-indices. The degree of financial well-being is not directly related to wealth as traditionally measured (i.e. GDP), but shows some correspondence with socio-economic characteristics of the population and with governance and cultural elements of a country. Practical implications: Understanding financial well-being could help financial institutions to transition from a one-size-fits-all approach to a more tailored approach when they provide financial services and could help policy makers to consider financial well-being when they decide how and where to allocate public spending. Originality/value: To the best of authors’ knowledge, this study is the first to employ a fuzzy methodology for the analysis of financial well-being in Europe.