Income and subjective well-being: Evidence from Singapore's first national non-contributory pension

• Main Authors: CHEN, Yanying, TAN, Yi Jin
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2018
• Subjects: subjective well-being; life satisfaction; health; income; non-contributory pension; Singapore; Singapore Life Panel; Asian Studies; Behavioral Economics; Finance
• Online Access: https://ink.library.smu.edu.sg/soe_research/2245; https://ink.library.smu.edu.sg/context/soe_research/article/3244/viewcontent/Income_and_Subjective_Well_Being_2018_wp.pdf
• Institution: Singapore Management University

We use a new monthly panel and a difference-in-differences strategy to study the effects of an exogenous permanent income shock on subjective well-being along previously unexplored dimensions. This permanent income shock is the introduction of Singapore’s first national non-contributory pension, the Silver Support Scheme. The pension improved the life satisfaction of recipients, and appeared to be driven by social, household income, and economic satisfaction. Consistent with the predictions of standard consumption-savings models, well-being improved when the shock was unanticipated (at announcement), but did not improve significantly further when the shock was anticipated (at disbursement). In addition, we find evidence that the marginal utility of income varies – recipients who reported being less financially prepared for retirement exhibited larger increases in well-being. Surprisingly, we find little evidence of such heterogeneity by individuals’ net assets. Lastly, well-being did not improve if an individual’s spouse received SSS payouts but he/she did not. Our results suggest that future policies could consider heterogeneity among individuals for greater welfare gains.