Income Comparisons, Income Formation, and Subjective Well-Being: New Evidence on Envy versus Signaling
AbstractDrawing on the distinction between envy and signaling effects in income comparison, this paper uses 307,465 observations for subjective well-being and its covariates from Germany, 1990-2009, to study whether the nature of income comparison has changed in the process of economic development, and how such changes are related to changes in the nature of income formation. By conceptualizing a person¿s comparison income as the income predicted by an earnings equation, we find that, while in 1990-1999 envy has been the dominant concern in West Germany and signaling the dominant factor in East Germany, income comparison was non-existing in 2000-2009. We also find that the earnings equation reflects people¿s ability more accurately in the second than in the first period. Together, these findings suggest that comparing one¿s income with people of the same ability is important only when ability is insufficiently reflected in own income.
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Bibliographic InfoPaper provided by DIW Berlin, The German Socio-Economic Panel (SOEP) in its series SOEPpapers on Multidisciplinary Panel Data Research with number 552.
Length: 24 p.
Date of creation: 2013
Date of revision:
Income comparison; envy; signaling; subjective well-being; income formation;
Other versions of this item:
- Heinz Welsch & Jan Kühling, 2013. "Income Comparison, Income Formation, and Subjective Well-Being: New Evidence on Envy versus Signaling," Working Papers V-356-13, University of Oldenburg, Department of Economics, revised Apr 2013.
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- P36 - Economic Systems - - Socialist Institutions and Their Transitions - - - Consumer Economics; Health; Education and Training; Welfare, Income, Wealth, and Poverty
- Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Social and Economic Stratification
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-05-24 (All new papers)
- NEP-HAP-2013-05-24 (Economics of Happiness)
- NEP-HME-2013-05-24 (Heterodox Microeconomics)
- NEP-LTV-2013-05-24 (Unemployment, Inequality & Poverty)
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.:
- Gundi Knies, 2012. "Income Comparisons Among Neighbours and Satisfaction in East and West Germany," Social Indicators Research, Springer, vol. 106(3), pages 471-489, May.
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Tinbergen Institute Discussion Papers
02-024/3, Tinbergen Institute.
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IEW - Working Papers
080, Institute for Empirical Research in Economics - University of Zurich.
- Bruno S. Frey & Alois Stutzer, 2002. "What Can Economists Learn from Happiness Research?," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 402-435, June.
- Bruno S. Frey & Alois Stutzer, 2001. "What Can Economists Learn from Happiness Research?," CESifo Working Paper Series 503, CESifo Group Munich.
- Ferrer-i-Carbonell, Ada, 2005. "Income and well-being: an empirical analysis of the comparison income effect," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 997-1019, June.
- Eichhorst, Werner & Marx, Paul, 2009. "Reforming German Labor Market Institutions: A Dual Path to Flexibility," IZA Discussion Papers 4100, Institute for the Study of Labor (IZA).
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