Health, Life Satisfaction, and Quality of Life in Ageing Economies: Modelling for Unfolding Endogeneity

Population ageing has intensified the need for robust measures of wellbeing beyond income and morbidity. This study examines wellbeing from the joint determination of perceived health, life satisfaction and quality of life among older adults. Using data from the Survey of Health, Ageing and Retirement in Europe (SHARE) covering seven European countries, we estimate recursive semi-ordered probit models with full-information maximum likelihood. Our empirical strategy allows for correlated unobservables and employs household financial stress and household size as instruments to correct for endogeneity. The results demonstrate that perceived health is a central endogenous driver of both life satisfaction and quality of life, with effects strongest among individuals at lower levels of wellbeing. Reciprocal feedback from subjective wellbeing to health perceptions is also statistically significant, confirming simultaneity across outcomes. While the existence of these relationships is consistent across countries, their magnitude varies systematically across welfare regimes, reflecting differences in institutional support and economic vulnerability. From a policy perspective, the findings suggest that subjective wellbeing is multidimensional and that healthy ageing with positive functioning results from an integrated health and social policies. Methodologically, this study contributes to a parsimonious econometric framework for analysing multidimensional wellbeing in different policy settings.