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Economic choices and status: measuring preferences for income rank

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  • Redzo Mujcic
  • Paul Frijters

Abstract

We report on the trade-offs that 1,068 Australian university students make between absolute income and the rank of that income in hypothetical income distributions. We find that income rank matters independently of absolute income, with greater weight given to rank by males, migrants, and individuals from wealthy families. Rank-sensitive individuals require as much as a 200% increase in income to be compensated for going from the top to the bottom of the income distribution. Migrants residing abroad for longer periods of time, and with more affluent job titles, are more likely to compare themselves to others at the destination. A dynamic choice model of compensating incomes predicts the average respondent to need a permanent increase in income of up to $10,000 (70%) when moving from a society with a mean income of $14,000 (e.g., Mexico) to a society with a mean income of $46,000 (e.g., the USA). Copyright 2013 Oxford University Press 2012 All rights reserved, Oxford University Press.

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Bibliographic Info

Article provided by Oxford University Press in its journal Oxford Economic Papers.

Volume (Year): 65 (2013)
Issue (Month): 1 (January)
Pages: 47-73

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Handle: RePEc:oup:oxecpp:v:65:y:2013:i:1:p:47-73

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  1. Olof Johansson-Stenman & Fredrik Carlsson & Dinky Daruvala, 2002. "Measuring Future Grandparents" Preferences for Equality and Relative Standing," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 112(479), pages 362-383, April.
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Cited by:
  1. Yoshiyasu Ono & Katsunori Yamada, 2012. "Difference or Ratio: Implication of Status Preference on Stagnation," ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 0856rr, Institute of Social and Economic Research, Osaka University, revised Jan 2014.
  2. Marjit, Sugata & Santra, Sattwik & Hati, Koushik Kumar, 2014. "Does inequality affect the consumption patterns of the poor? – The role of “status seeking” behaviour," MPRA Paper 54118, University Library of Munich, Germany.
  3. Clark, Andrew E. & D'Ambrosio, Conchita, 2014. "Attitudes to Income Inequality: Experimental and Survey Evidence," IZA Discussion Papers 8136, Institute for the Study of Labor (IZA).
  4. Laszlo Goerke & Inga Hillesheim, 2013. "Relative Consumption, Working Time, and Trade Unions," CESifo Working Paper Series, CESifo Group Munich 4318, CESifo Group Munich.
  5. Marjit, Sugata & Roychowdhury, Punarjit, 2011. "Status, Poverty and Trade," MPRA Paper 33730, University Library of Munich, Germany.
  6. Lohmann, Steffen, 2013. "Information technologies and subjective well-being: Does the internet raise material aspirations?," Center for European, Governance and Economic Development Research Discussion Papers, University of Goettingen, Department of Economics 169, University of Goettingen, Department of Economics.
  7. Sugata Marjit & Sattwik Santra & Koushik Kumar Hati, 2014. "Does inequality affect the consumption patterns of the poor? – The role of status seeking behaviour," Discussion Papers Series, School of Economics, University of Queensland, Australia 514, School of Economics, University of Queensland, Australia.

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