Unobserved Heterogeneity in the Relationship Between Life Satisfaction, Contentment, and Affect. Implications for Income's Relevance

Contentment and affect are substrates of information people use when making an overall assessment of satisfaction with life. Most studies assume homogeneity across people in the relevance of affect and contentment. This paper studies the existence of heterogeneity across people in the relationship between life satisfaction and affect and contentment. In addition, the paper postulates that, due to the complexity of factors intervening in the relationship, this heterogeneity is unobserved. A technique to study unobserved heterogeneity in the relationship between life satisfaction and affect and contentment is implemented. Based on a large worldwide sample, three groups are identified; these groups have different profiles regarding the role of affect and contentment in explaining life satisfaction. The groups are meaningful, as different relationships between life satisfaction and affect and contentment have implications; for example, income's relevance in explaining life satisfaction varies across groups.