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Income Rank and Upward Comparisons

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  • Boyce, Christopher J.
  • Brown, Gordon D. A.

Abstract

Many studies have argued that relative income predicts individual well-being. More recently, it has been suggested that the relative rank of an individual’s income, rather than how that income compares to a mean or reference income, is important. Here the relative rank hypothesis is examined along with the additional hypothesis that individuals compare their incomes predominantly with those of slightly higher earners. A study of over 12,000 British adults using the British Household Panel Survey (a) confirms the importance of rank and (b) finds evidence that individuals compare upwards and to those most similar. This paper appears to be the first to show in fixed effect well-being equations that the influence of rank is more important than the influence of relative pay.

Suggested Citation

  • Boyce, Christopher J. & Brown, Gordon D. A., 2008. "Income Rank and Upward Comparisons," Economic Research Papers 269895, University of Warwick - Department of Economics.
    • Handle: RePEc:ags:uwarer:269895
    DOI: 10.22004/ag.econ.269895
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    References listed on IDEAS

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    Cited by:

    1. FitzRoy, Felix & Nolan, Michael A. & Steinhardt, Max F., 2011. "Age, Life-Satisfaction, and Relative Income: Insights from the UK and Germany," IZA Discussion Papers 6045, Institute of Labor Economics (IZA).
    2. Felix R., FitzRoy & Michael, Nolan & Max F., Steinhardt, 2013. "Age, Life-satisfaction, and Relative Income – Insights from the UK and Germany," SIRE Discussion Papers 2013-51, Scottish Institute for Research in Economics (SIRE).

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