Do private and public transfers received affect life satisfaction? Evidence from Romania

This paper uses Romanian survey data to investigate the determinants of individual life and financial satisfaction, with an emphasis on the role of public and private transfers received. A possible concern is that these transfers are unlikely to be exogenous to satisfaction. We use recursive simultaneous equations models to account both for this potential problem and for the fact that public transfers are themselves endogenous in the private transfer equation. We find that public transfers received have a positive influence on both life and financial satisfaction, while private transfers do not matter. People receive private transfers irrespective of their economic and demographic characteristics in Romania, which could be explained by some social norm motives.

► We study if public and private transfers influence life and financial satisfaction. ► With non-linear recursive models we account for some possible endogeneity problems. ► Public transfers received have a positive effect on life and financial satisfaction. ► Private transfers received do not seem to matter for subjective well-being. ► Results indicate an incomplete crowding-out effect in the public transfer equation.