Subjective wealth and satisfaction with policy reform: evidence from the cotton reform experience in Burkina Faso

This paper examines the relationship between individual changes in objective and subjective welfare in the context of rural development. Taking the case of the cotton reform in Burkina Faso, the author studies the determinants of the joint distribution of changes in subjective welfare and subjective appreciation of the welfare effects of a policy reform at the household level. A reference-based utility function with personality effects is introduced to explain large increases in experienced subjective welfare with no corresponding increases in consumption and income. Using subjective and objective welfare variables from data collected in cotton areas before and after the cotton reform, several empirical specifications are estimated to explore reference and personality effects at play, while addressing measurement issues related to subjective indicators, i.e. heterogeneity in latent psychological factors. In addition to absolute and relative welfare changes, both the large increase in subjective wealth and the ubiquitous satisfaction with the cotton reform are found to be heterogeneously driven by personality and information effects across income and ethnic groups, which underlies significant but heterogeneous appropriation of the welfare effects and policy content of the cotton reform. Bibliogr., notes, ref., sum. [Journal abstract]

Title:Subjective wealth and satisfaction with policy reform: evidence from the cotton reform experience in Burkina Faso
Author:Kaminski, Jonathan
Year:2014
Periodical: Journal of African Economies (ISSN 0963-8024)
Volume:23
Issue:4
Pages:528-581
Language:English
Geographic term:Burkina Faso
External link:http://jae.oxfordjournals.org/content/23/4/528.abstract
Abstract:This paper examines the relationship between individual changes in objective and subjective welfare in the context of rural development. Taking the case of the cotton reform in Burkina Faso, the author studies the determinants of the joint distribution of changes in subjective welfare and subjective appreciation of the welfare effects of a policy reform at the household level. A reference-based utility function with personality effects is introduced to explain large increases in experienced subjective welfare with no corresponding increases in consumption and income. Using subjective and objective welfare variables from data collected in cotton areas before and after the cotton reform, several empirical specifications are estimated to explore reference and personality effects at play, while addressing measurement issues related to subjective indicators, i.e. heterogeneity in latent psychological factors. In addition to absolute and relative welfare changes, both the large increase in subjective wealth and the ubiquitous satisfaction with the cotton reform are found to be heterogeneously driven by personality and information effects across income and ethnic groups, which underlies significant but heterogeneous appropriation of the welfare effects and policy content of the cotton reform. Bibliogr., notes, ref., sum. [Journal abstract]