Uneven Grounds and Unequal Losses: Structural Disadvantage and Behavioural Biases in Well-Being

This thesis examines the roles of area-level deprivation and psychologically driven loss aversion in shaping subjective well-being. Drawing on data from the UK Household Longitudinal Study linked with the English Indices of Multiple Deprivation, the first empirical chapter demonstrates that living in a deprived neighbourhood systematically depresses life satisfaction — even for individuals with relatively higher incomes. Propensity score matching indicates this effect is not just a product of self-selection, suggesting that limited local resources or weak social structures exert an independent toll on well-being. Shifting focus from context to cognition, Chapter 3 uses the Household, Income and Labour Dynamics in Australia survey to examine how perceived income “losses” below a person’s permanent or typical baseline produce disproportionately larger drops in life satisfaction compared to equivalent gains. This asymmetry remains robust under varied definitions of permanent income and persists after controlling for key socioeconomic characteristics. Extending beyond finances, a discrete choice experiment in Chapter 4 shows similarly strong aversive responses in other domains, implying that negative deviations — whether in income, health, or autonomy — carry more weight than comparable positive changes. Together, these findings highlight that structural disadvantage and individual reference points can have substantial impacts on life satisfaction. Place-based inequalities constrain how far income alone can boost well-being, while loss aversion magnifies the damage caused by even modest downturns in key life spheres. Consequently, effective policy interventions may require both community-level improvements — better infrastructure, social services, and employment opportunities — and safeguards against sharp declines in individual income or health status. By uniting quasi-experimental methods with experimental approaches, the thesis underscores the critical interplay of local context and human psychology in determining well-being, offering a foundation for more holistic policy strategies aimed at enhancing life satisfaction and resilience.