Consumption and life satisfaction: The Korean evidence

This study examines the association between consumption expenditure and life satisfaction among older Koreans (aged 50 or older). We estimate a series of individual fixed effects regressions that link life satisfaction to various types of household consumption using data drawn from the Korean Longitudinal Study of Aging. The results show that leisure consumption is positively related to life satisfaction and that this association is driven largely by uncommon and infrequent leisure activities, like travel and entertainment. Expenditures for leisure that provides more ordinary experiences, such as recreation and self-development programs, were generally uncorrelated with life satisfaction, despite being consumed by a large fraction of older Koreans. Finally, the evidence on whether material purchases or status-enhancing purchases were positively correlated with life satisfaction is mixed. On the one hand, our findings reaffirm the conventional wisdom that people feel more satisfied when spending money on experiences than on material possessions. On the other hand, we provide the novel finding that consumption directed towards extraordinary and memorable experiences that go beyond everyday life tends to generate greater life satisfaction.