Abstract
This paper aims to explore and compare different types of econometric models for capturing impacts of microfinance on the level of self-reported happiness and subjective wellbeing indicators such as life domain satisfaction, positive and negative affects. Using a comparison of microfinance case studies from Thailand (The village fund programme and the savings group fund) and Brazil (Social bank programme), this research examines the impact of small loans for the poor on their happiness and subjective wellbeing indicators. The data is from household surveys and in-depth interviews, collected by the author in 2008-2009 in rural areas of both countries. When measuring the impact of microfinance on happiness and other related subjective indicators, the issues of discrete choice problems involving binary, ordered or multinomial discrete alternatives cannot be avoided. In this study, for example, self-reported happiness can be measured in a categorical variable (1 = not too happy, 2 = fairly happy, and 3 = very happy). A large body of previous literature acknowledges the inappropriateness of using linear regression when the dependent variable is categorical. By using different types of model, including ordinary least square, ordered probit and ordered logit models, multinomial logit model, binary choice model, and Heckman selection model, results have been generated showing differences and similarities among those methods which can assist in selecting the optimal model.
Author(s): Thanawit Bunsit