Determinants of Subjective Well-Being: Case of Albania

There is a growing interest recently towards research in the economics of happiness. Research in this area highlights the importance of subjective well-being as an indicator of welfare. The purpose of this study is to identify the main factors influencing subjective well-being in Albania and discuss the main issues regarding the self-reported data and subjective nature of this topic. Subjective well-being is a term used to identify the subjective evaluation of life satisfaction in general by individuals through survey questions. This term is considered very broad and includes many aspects of individual well-being, valuations that people make regarding their life which include their mental, physical and financial state. Traditionally well-being has been identified by objective measures such as GDP or life expectancy. However, these measures cannot capture all aspect of human well-being. Therefore, there has been a growing literature measuring it using subjective measures by asking people how satisfied are they with their lives in general. Literature in this aspect has identified several factors which affecting subjective well-being such as socio-demographic factors, health status, income, social capital, and environmental quality. Although there is a growing literature using subjective measures, they have several limitations and the question raised is if these indicators are reliable for policymakers. This paper delivers an overview of the growing literature in this filed and discuss the main factors that have an impact on the subjective well-being of individuals in Albania.