The Importance of Health as a Predictor of Subjective Well Being: A Development Economics Perspective

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1. Introduction

The subjective well-being (SWB) of individuals is an important aspect of the current economic, social and political debate. Personal aspirations, life expectations, and the means required to achieve desired ends have all been studied in previous social science research (Douthitt et al., 1992). It has been argued that a good measure of SWB should be based on how people feel about their lives as they are lived, rather than on more objective notions such as income or consumption (Diener et al., 1999). This article argues that health is one of the most robust predictors of subjective well‑being among other dimensions (social, economic and political), because it operates simultaneously as a consumption good (direct enjoyment of life) and an investment good (enabling income, education and social participation). While income exhibits diminishing returns after a threshold and political trust varies across contexts, health improvements can consistently raise SWB across developed and developing countries. The article therefore concludes by arguing for development policies that target population health and yield broader well‑being gains than those targeting income alone.

2.  Overview of Subjective Well‑Being

When we look at the history of philosophy and religion, we see that subjective well‑being is highly valued i.e., people have cared about happiness. For instance, eudaimonia, which might be translated as “happiness”, was for Aristotle the final and adequate aim towards which all additional objectives were pursued (Ryan & Deci, 2001). Although the concept of well‑being differs among individuals, gaining utility or happiness is relative. Some people place great emphasis on skill, some on social relationships, whilst others pursue a particular goal. If a person is content with their life, it is because they place a high relative value on certain attributes. Diener et al. (1998) clarify that people who have a sense of mastery and are making progress toward their goals experience SWB, through engagement in enjoyable and stimulating hobbies and healthy social interactions.

From an economics perspective there has been a long‑held view that gross domestic product (GDP) is a good indicator of societal prosperity and well‑being, since it correlates strongly with living condition indices. Further, economic theory uses the term ‘utility’ to describe a concept reflective of overall well‑being or total satisfaction derived by optimising one’s bundle of goods and services given price and budget constraints. An individual’s utility may increase with successive increases in income and wealth-yet this contradicts some empirical studies. Objective indicators (e.g. salary level) may not always give information relevant to an individual’s living circumstances; hence subjective measures have been proposed to supplement them. For example, using only salary to determine job satisfaction ignores subjective data like motivation, job satisfaction, depression, anxiety and stress.

Therefore, given the challenges of expressing well‑being solely through GDP or disposable income, scholars from many fields have proposed measuring well‑being by both objective and subjective means.

3.  Measuring Subjective Well‑Being

In the recent past, numerous scholars have concentrated their efforts on discovering the important dimensions and significant elements that can influence human well‑being, either favourably or unfavourably. Subjective well-being can be measured using several different methods: surveys, questionnaires, interviews, or observation of actual behaviour (e.g. personal journals). Responses are aggregated to provide an overall score indicating how happy or content people are. Researchers typically use self‑report rating scales to quantify happiness. Worldwide, multi‑item scales such as the Positive and Negative Affect Schedule (PANAS) are extensively used (Voukelatou et al., 2021; Watson et al., 1988). While the PANAS remains a widely used measure of affective well-being, researchers also commonly employ the Satisfaction with Life Scale (SWLS) (Diener et al., 1985) to capture the cognitive-evaluative component of subjective well-being, or the Warwick‑Edinburgh Mental Well-being Scale (WEMWBS) (Tennant et al., 2007) to assess integrated hedonic and eudaimonic well-being. In development contexts, the Mental Health Continuum – Short Form (MHC‑SF) has been validated in a South African setting (Opperman et al., 2025), and the WHOQOL‑BREF provides domain‑specific health‑related quality of life data suitable for policy evaluation (Skevington et al., 2004). However, biases may be present as self‑report results may be influenced by the respondent’s mood or the phrasing of preceding questions. More recently, social media platforms have enabled continuous data collection, which allows frequent updating of responses, though this excludes a large fraction of the population. Because pros and cons exist in each type of data collection, a mixed‑method approach can yield more valid and precise results (Eid & Diener, 2006).

Unlike classic macroeconomic measures (GDP, inflation, national income), subjective methods can capture varying degrees of people’s happiness. Interestingly, the usual perception is that higher income means higher life satisfaction, but according to the Easterlin paradox (Easterlin, 1995), while transient fluctuations in income affect happiness, happiness does not increase over time as wealth rises.

4.  The Dimensions of Subjective Well‑Being

For simplicity, we break down the determinants of SWB into three main dimensions: social environment, economic environment and political environment. These dimensions are important to consider when designing appropriate policies for the general population.

4.1.  Social environment

Very broadly, an individual’s social environment is an important determinant of their well‑being. Education, for example, directly affects life satisfaction. Evidence suggests that higher education degrees (bachelor’s or master’s) have a significant favourable impact on SWB, whereas secondary education (high school diploma) does not (Yakovlev & Leguizamon, 2012). Living environment and climate also matter: Rishi & Mudaliar (2014) show that climate‑change‑induced stress has a detrimental influence on SWB.

4.2.  Economic environment

Traditionally, income is perceived to affect life satisfaction, especially in poor households. Based on Easterlin’s work, income increases SWB over time, but only up to a point. Veenhoven (1991) argues that income helps individuals meet certain universal needs, and therefore that income, at least at lower levels, is a cause of subjective well-being – an absolute rather than purely relative standard. Regular economic endowments are a necessary but not sufficient condition. Douthitt et al. (1992) argue that how people evaluate their lives (positively or negatively) is linked to how they gain and spend money, but that's not the whole story. Short-term wealth gains, like winning the lottery, have been shown to produce only temporary boosts in life satisfaction (Brickman et al., 1978). In contrast, other research shows that large lottery wins can raise overall life satisfaction for over a decade (Lindqvist et al., 2020). Adding to this, Ervasti & Venetoklis (2010) find that the stress of being unemployed can dramatically reduce subjective well-being.

4.3.  Political environment

The political system affects SWB through multiple channels. Individuals' political freedom and trust in government influence their sense of agency. According to Tavits (2008), when governments are clean, having one's preferred party in power improves happiness; when governments are corrupt, it does not. Crime and victimisation matter substantially: Sulemana (2015) finds that fear of crime and physical assault have large negative effects on SWB in African contexts – effects that operate partly through restricting mobility and reducing social participation, which are themselves health-relevant behaviours.

However, political determinants are more context-dependent than health. In weak institutional settings, the influence of political trust on well-being may be more limited once basic material conditions are accounted for, although the precise explanatory power of political trust relative to health and income remains an open empirical question (De Neve & Sachs, 2020). The political environment therefore functions primarily as a moderator rather than a primary driver of SWB – unlike health, which operates directly as both a consumption and investment good.

5.  Health as a Predictor of Subjective Well‑Being

Health has been researched extensively as a strong predictor of an individual’s well‑being. Amartya Sen (1980) underlined the need for excellent health in order to thrive and function in other areas of life. Grossman (1972) made a crucial distinction between the consumption value of health (being healthy directly feels good) and the investment value (health enables higher income, education and social engagement). Thus, health plays a dual role: intrinsically as a direct source of well‑being and instrumentally as a means to other ends. Empirical evidence from Ngamaba et al. (2017) shows a medium-to-strong, statistically significant positive association between health status and subjective well-being (pooled Pearson's r= 0.347), with the relationship being particularly strong when well-being is measured as life satisfaction (r = 0.365). Further, Kim et al. (2015) note that taking precautionary measures to reduce the risk of illness or ill-health translates into better well‑being. However, the link between health and well-being is not always direct. A person suffering from depression or anxiety, for example, may appear physically healthy yet have poor SWB. Moreover, the relationship is bidirectional: higher SWB encourages healthy habits, but it can also sometimes incentivise risky behaviours – meaning that being too happy is not always beneficial; moderate positive affect appears optimal. When ill‑health causes functional restrictions, it becomes harder to perform activities that sustain SWB (Ormel et al., 1999). Nonetheless, adaptation can occur, for example, elderly people may report relatively high SWB despite poor health. In addition, chronic conditions such as preterm birth, HIV‑positive status, and cancer have a severe negative influence on SWB (Winstanley et al., 2015). However, Diener and Chan (2011) found that SWB consisting of life satisfaction, absence of negative emotions, optimism, and positive emotion, leads to better health and longevity, thus closing a virtuous cycle.

5.1.  Reconciling Growth and SWB: A Threshold Perspective

First, how can economic growth enhance subjective well-being (SWB)? The evidence is mixed: growth is essential for development, yet some findings suggest that growth can lower SWB. This puzzle resolves once we recognise that income matters only up to a point. In poor countries, growth raises SWB by helping people meet basic needs like food, housing, and healthcare (Veenhoven, 2018). However, once a country reaches a wealth level sufficient to cover basic needs, further growth adds little or nothing to SWB. Beyond that threshold, extra income may even reduce SWB due to social comparison (keeping up with neighbours), environmental damage, and stress from long working hours (Easterlin, 1995; Helne & Hirvilammi, 2015).  

This brings us to the Easterlin Paradox. Richard Easterlin (1995; Easterlin et al., 2010) observed that while within-country income comparisons show a positive relationship with SWB, average happiness does not rise with average income across countries or over time beyond a modest threshold. The implied mechanism is adaptation (the "hedonic treadmill"): whereby aspirations rise proportionally with income, leaving SWB unchanged.

However, a substantial body of recent work challenges this finding. Using larger cross-country datasets and longer time series, Stevenson and Wolfers (2008) establish a clear positive link between average SWB and GDP per capita across countries and find no evidence of a satiation point beyond which wealthier countries experience no further SWB gains. They further show that economic growth within countries is associated with rising happiness over time. Deaton (2008), analysing the Gallup World Poll, similarly finds no satiation point. Sacks, Stevenson and Wolfers (2012) extend these findings, showing that measured SWB grows hand in hand with material living standards across a wide range of development levels.

The debate has not been definitively settled. Prior contributions (e.g., Kahneman & Deaton, 2010, on emotional well-being vs. life evaluation) suggest that different measures of well-being may yield different income relationships. What is uncontested is that for low-income populations, income growth produces substantial SWB gains by helping people meet basic needs like food, housing, and healthcare (Veenhoven, 2018); the disagreement concerns whether this relationship persists, weakens, or disappears at higher income levels.

For policy, this uncertainty matters. If the Easterlin camp is correct, then beyond a modest threshold, further income growth is a poor instrument for SWB improvement, and health-focused policies can become more important. If Sacks, Stevenson and Wolfers are correct, then income growth continues to matter across the development spectrum, though health may still be a more efficient investment per dollar. Regardless of which view prevails, health improvements generate SWB gains through mechanisms (direct enjoyment and human capital investment) that income alone cannot replicate. Thus, health policies complement income growth and become more important in richer nations, while poorer ones need hybrid policies for both.

6.  Policy Implications

If health is one of the most robust predictors of SWB, and if income exhibits diminishing returns after a threshold, then development policy should reallocate resources toward population health. But which interventions yield the largest SWB gains per dollar, for which populations, and through what pathway? We use the latest poverty lines (World Bank, 2025).

6.1.  Mechanisms: Consumption vs. Investment Pathways

Health improves SWB through two distinct mechanisms (Grossman, 1972):

• Consumption pathway: Being healthy directly feels good – no mediation through income or education. This includes freedom from pain, energy, mobility, and mental well-being.

• Investment pathway: Good health enables schooling (children attend regularly), work (adults can labour productively), and social participation (elderly remain engaged).

Policy interventions should target both pathways, but the optimal mix depends on development context.

6.2.  For Whom: Threshold-Dependent Targeting

Population	Binding constraint	Most effective intervention	SWB mechanism
Extreme poverty (below $3/day)	Basic survival	Disease eradication (malaria, TB, HIV), clean water	Investment (enables work)
Low-income ($2-10/day)	Healthcare access	Primary care clinics, vaccination campaigns	Mixed consumption/investment
Middle-income	Chronic disease, mental health	Depression screening, hypertension management	Consumption (direct relief)
High-income (post-threshold)	Social isolation, elderly health	Long-term care, mental health services	Consumption (quality of life)

The Easterlin paradox implies that for populations above the middle-income threshold, further income growth yields negligible SWB gains. For these groups, health consumption interventions would dominate.

6.3.  Which Interventions: Evidence-Based Priorities

Meta-analytic evidence (Ngamaba et al., 2017; Buecker et al., 2021) supports four high-yield categories:

a) Infectious disease control – Malaria prophylaxis, TB treatment, HIV/AIDS, and vaccination campaigns produce large SWB gains in low-income settings, primarily through the investment pathway (children attend school, adults work). Cost per disability-adjusted life year (DALY) averted is extremely low.

b) Mental health services – Depression and anxiety affect SWB through the consumption pathway directly (misery) and the investment pathway indirectly (lost workdays, social withdrawal). WHO's mhGAP model of integrated care is a cost-effective alternative to specialist-only models for delivering mental health services (Keynejad et al., 2018).

c) Preventive population health – Clean water, sanitation, and indoor air quality interventions generate SWB gains that are both large and equitably distributed. Unlike targeted individual treatments, these are non-excludable and benefit entire communities simultaneously.

d) Elderly functional health – In aging populations (increasingly relevant for middle-income countries), interventions preserving mobility – cataract surgery, joint replacement, hearing aids – produce SWB gains comparable to large income increases. Ormel et al. (1999) show that functional restrictions mediate most of the health-SWB relationship in older adults.

6.4. Policy Design Principles

Three suggested principles follow from the mechanism analysis:

First, prioritise population-wide over individual interventions: Individual-level policies (e.g., personalised diet coaching) are expensive per capita and context-dependent. Population interventions (water treatment, vaccination, sin goods taxation) reach everyone and require no behavioural uptake beyond passive compliance.

Second, tax health "bads" or sin goods: Tobacco taxes, for example, reduce smoking prevalence, lower healthcare expenditure, and decrease second‑hand smoke exposure – a health shock that non‑smokers did not choose. Similarly, sugar‑sweetened beverage taxes can reduce obesity and diabetes risk, while alcohol taxes lower rates of liver disease, violence, and traffic injuries. Each of these taxes internalises a negative externality: consumers pay for the social harm their consumption imposes on others. The SWB gain from avoiding passive smoke, reduced childhood obesity, or fewer alcohol‑related accidents represents an uninternalised positive externality of sin goods taxation – a benefit that market prices alone would not produce.

Third, measure SWB using mixed methods: Self-reported life satisfaction (SWLS, PANAS) captures perceived well-being but is mood-sensitive. Revealed preference methods (e.g., willingness-to-pay for health improvements) provide behavioural validation. Policy evaluation should use a combination of both.

7.  Conclusion

This article has argued that health is one of the most robust predictors of subjective well-being compared to the social, economic and political dimensions. Unlike income – which exhibits diminishing returns after a threshold (the Easterlin paradox) – and unlike political trust – which depends on institutional quality and moderates rather than drives SWB – health improvements consistently raise SWB across development contexts through both consumption and investment channels.

Thus, the policy implication is not that 'health matters' in general, but which specific health interventions matter: infectious disease control for the poor, mental health services for middle-income groups, and functional health preservation for the elderly. These generate SWB gains that income growth alone cannot deliver, especially for populations past the income threshold. By shifting from GDP-centric to well-being-centric development and within that, from generic health spending to mechanism-targeted interventions, policymakers can achieve both higher life satisfaction and more sustainable human development.

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