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Higher life expectancy and lower fertility rates are changing the global population structure, leading to a fast-growing ageing society. To face this societal challenge, governments worldwide are increasing public expenditures focusing on healthy ageing. The objective of these investments is to increase quality of life among older people. However, there is a lack of studies focused on understanding the extent to which a wide range of demographic, socioeconomic and health characteristics are associated with quality of life in advanced ages. Therefore, the objective of this paper is to explore the role of a variety of factors towards quality of life, with a particular focus on health. Structural Equation Modelling (SEM) is employed using Stata 16 to explore these associations, using data drawn from the Survey of Health, Ageing and Retirement in Europe (SHARE). Contrary to many studies which use self-assessed single-item questions or additive indices to measure unobserved concepts, such as health and quality of life, this paper models such constructs as latent variables. Moreover, a minor contribution of this paper is to employ standard statistical techniques using additive indices along with the main SEM estimation. As the theory predicts, estimates found with additive indices are downward biased compared to latent variables, but so far, there are no studies showing this empirical exercise. The overall findings suggest that non-pecuniary factors, especially physical health status and participating in social activities, play a larger role in enhancing quality of life in advanced age compared to pecuniary factors such as income and financial assets. Therefore, greater attention should be paid on non-economic factors to enrich quality of life among an increasingly ageing population.
