Is Being Satisfied Making You Wealthy and Wise? A Study of the Effects of Well-Being at the City-Level

Abstract

The study presented here researches subjective well-being, wages, educational attainment, and how well-being affects both wages and educational attainment through reverse causality. From Gallup-Healthways Well-Being Survey, a total of 187 metropolitan statistical areas were observed and 152 of these cities were used in our regression analysis for completeness reasons. This study adds to the literature of determinants of well-being, wage, and educational attainment, as well as the literature of approaches to endogeneity issues, and identifying and correcting reverse causality between variables in a system of equations through the use of two and three-stage-leastsquares methods. We found that well-being had a significant, but negative, effect on wage and a significantly positive effect on educational attainment. From this result, we approached the well-being equation with a two-stage-least-squares method in order to determine if the relationship between wage, well-being, and educational attainment were causing biased results when using ordinary least squares methodology. It was found that there was bias and a two-stage-least-squares method was helpful in correcting for this issue. We suggest that further research into how well-being affects other variables is important and necessary.