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The Relative Utility Hypothesis With and Without Self-reported Reference Wages

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  • Adrián De la Garza
  • Giovanni Mastrobuoni
  • Atsushi Sannabe
  • Katsunori Yamada

Abstract

This article uses survey data of workers in Japan to study the effects of own and self-reported reference wages on subjective well-being. Higher wages lead to higher life and job satisfaction. When workers perceive that their peers earn higher wages, they report lower well-being. We compare our results with relative utility tests in the literature and develop a generalized version of the classical measurement error model to show that the estimated bias of the reference wage effect can go in both directions. We propose an IV strategy when the self-reported reference wage is not available that does not eliminate the bias but delivers a lower bound of the "true" effect.

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File URL: http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/%7BF02402AE-3A77-B473-1C9D-22DE8A22CBC9%7D.pdf
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Bibliographic Info

Paper provided by Banco de México in its series Working Papers with number 2010-19.

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Date of creation: Dec 2010
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Handle: RePEc:bdm:wpaper:2010-19

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Keywords: Subjective well-being; relative utility; reference wages;

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Citations

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Cited by:
  1. Katsunori Yamada & Masayuki Sato, 2010. "Another Avenue for Anatomy of Income Comparisons: Evidence from Hypothetical Choice Experiments," ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 0795, Institute of Social and Economic Research, Osaka University, revised Mar 2013.
  2. Katsunori Yamada & Masayuki Sato & Yasuhiro Nakamoto, 2009. "Measurement of Social Preference from Utility-Based Choice Experiments," ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 0759, Institute of Social and Economic Research, Osaka University.
  3. Andrew Clark & Claudia Senik & Katsunori Yamada, 2013. "The Joneses in Japan: Income Comparisons and Financial Satisfaction," ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 0866, Institute of Social and Economic Research, Osaka University.
  4. Temesgen Kifle & Isaac H. Desta, 2012. "Gender Differences in Domains of Job Satisfaction: Evidence from Doctoral Graduates from Australian Universities," Economic Analysis and Policy (EAP), Queensland University of Technology (QUT), School of Economics and Finance, Queensland University of Technology (QUT), School of Economics and Finance, vol. 42(3), pages 319-338, December.
  5. Temesgen Kifle, 2014. "Do Comparison Wages Play a Major Role in Determining Overall Job Satisfaction? Evidence from Australia," Journal of Happiness Studies, Springer, Springer, vol. 15(3), pages 613-638, June.
  6. Goerke, Laszlo & Pannenberg, Markus, 2013. "Keeping up with the Joneses: Income Comparisons and Labour Supply," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 80033, Verein für Socialpolitik / German Economic Association.

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