The effect of subjective well‐being on consumption behavior

Abstract The article studies the causal effect of subjective well‐being on the consumption behavior of individuals aged 50 and above using data from the English Longitudinal Study of Aging (ELSA). To establish a causal link between subjective well‐being and six distinct types of consumption (food consumed at home, food consumed outside of home, spending on clothing, leisure consumption, monthly rent, and utility consumption), it exploits the longitudinal dimension of the dataset and instruments for subjective well‐being. The analysis reveals that subjective well‐being positively affects spending on food outside of home and leisure activities, while having no significant effect on the consumption of food consumed at home, clothing, monthly rent, and utilities. These results imply that people with higher levels of subjective well‐being are more engaged in social and leisure activities, such as going out for dinner, which offers important implications for both long‐term, as well as habitual buying behavior.