The relationship between economic and subjective wellbeing indicators in Peru

Previous studies in Peru have identified apparent mismatches between people’s perceptions of their wellbeing and indicators of their material welfare. This paper draws on primary data from relatively poor localities in Central Peru to investigate these further. We first present estimates of respondents’ household income, expenditure and poverty status. This data is then compared with individual responses to a standard happiness question. We find people are generally happier in rural areas even though poverty in incidence there is greater. Additional data on different distinct aspects of subjective wellbeing is then used to explain the apparent paradox. We find rural respondents are more satisfied with the place where they live and progress in raising a family, while those in urban areas have higher material and related aspirations which they find hard to fulfil.