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Subjective Welfare, Isolation and Relative Consumption

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Author Info
Fafchamps, Marcel
Shilpi, Forhad

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Abstract

The recent literature has shown that subjective welfare depends on relative income. Attempts to test this relationship in poor countries have yielded conflicting results, suggesting that the relationship is not universal or only applies above a certain income level. We revisit the issue using data from Nepal. We find a relative consumption effect that is robust, strong in magnitude, and consistent across consumption expenditure categories. We find no evidence that poor households -- in a relative or absolute sense -- care less about relative consumption than more fortunate ones. Households residing far from markets care more -- not less -- about the consumption level of their neighbors, suggesting that market interaction is not what makes people care about relative consumption. Household heads having migrated out of their birth district still judge the adequacy of their consumption in comparison with households in their district of origin.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6002.

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Date of creation: Dec 2006
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Handle: RePEc:cpr:ceprdp:6002

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Related research
Keywords: relative deprivation; rivalry; subjective well-being;

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Find related papers by JEL classification:
I31 - Health, Education, and Welfare - - Welfare and Poverty - - - General Welfare
O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Aneel Karnani, 2009. "The Bottom of the Pyramid Strategy for Reducing Poverty: A Failed Promise," Working Papers 80, United Nations, Department of Economics and Social Affairs. [Downloadable!]
  2. Bert G.M. Van Landeghem, 2008. "Human Well-Being over the Life Cycle: Longitudinal Evidence from a 20-Year Panel," LICOS Discussion Papers 21308, LICOS - Centre for Institutions and Economic Performance, K.U.Leuven. [Downloadable!]
  3. Fafchamps, Marcel & Shilpi, Forhad, 2008. "Determinants of choice of migration destination," Policy Research Working Paper Series 4728, The World Bank. [Downloadable!]
  4. Richard P.C. Brown & Eliana V. Jimenez, 2008. "A Mixed-Motives Model of Private Transfers with Subjectively-Assessed Recipient Need: Evidence from a Poor, Transfer-Dependent Economy," Discussion Papers Series 365, School of Economics, University of Queensland, Australia. [Downloadable!]
  5. Chen, Xi & Zhang, Xiaobo, 2009. "Blood for Social Status: Preliminary Evidence from Rural China," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49411, Agricultural and Applied Economics Association. [Downloadable!]
  6. John Knight & Ramani Gunatilaka, 2009. "Is Happiness Infectious?," Economics Series Working Papers 446, University of Oxford, Department of Economics. [Downloadable!]
  7. Akay, Alpaslan & Martinsson, Peter, 2008. "Does Relative Income Matter for the Very Poor? Evidence from Rural Ethiopia," IZA Discussion Papers 3812, Institute for the Study of Labor (IZA). [Downloadable!]
  8. Richard P.C. Brown & Eliana V. Jimenez, 2008. "Remittances and Subjective Welfare in a Mixed-Motives Model: Evidence from Fiji," Discussion Papers Series 370, School of Economics, University of Queensland, Australia. [Downloadable!]
  9. Joe Chen & Yun Jeong Choi & Yasuyuki Sawada, 2008. "How Is Suicide Different in Japan?," CIRJE F-Series CIRJE-F-557, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
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