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Well-being Inequality and Reference Groups: An Agenda for New Research

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  • van Praag, Bernard M. S.

    ()
    (University of Amsterdam)

Abstract

In this paper it is argued that subjective well-being of the individual depends on two types of variables. The first type consists of characteristics of the individual himself, such as age, health, income, etc. The second type of variables consists of the characteristics of the individuals belonging to his reference group. The vast literature about happiness, quality of life, and well-being informs us extensively about the effects of objective variables. How the second type affects well-being is much less investigated. It is argued that the concept of well-being inequality cannot be properly defined without taking the referencing process into account. The reference effect depends on how frequently individuals compare with others and on the degree of social transparency in society. We attempt to give a structural embedding of the idea of reference groups in SWB-models. In this paper we employ the reference-extended model for incorporating in happiness studies the concept of inequality in happiness or SWB. Finally, we plead for an extension of the present happiness paradigm by setting up a new additional agenda for empirical research in order to get quantified knowledge about the referencing process. As a first step we suggest a new question module to be included in new survey questionnaires.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4727.

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Length: 33 pages
Date of creation: Jan 2010
Date of revision:
Publication status: published in: Journal of Economic Inequality, 2011, 9 (1), 111-127
Handle: RePEc:iza:izadps:dp4727

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Keywords: inequality; happiness; subjective well-being; reference group;

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References

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  1. Praag, B.M.S. van & Herwaarden, F.G. van & Kapteyn, A.J., 1979. "The definition and measurement of social reference spaces," Open Access publications from Tilburg University urn:nbn:nl:ui:12-361904, Tilburg University.
  2. Blanchflower, David G. & Oswald, Andrew J., 2004. "Well-being over time in Britain and the USA," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1359-1386, July.
  3. van Praag, Bernard M. S., 2010. "Well-being Inequality and Reference Groups: An Agenda for New Research," IZA Discussion Papers 4727, Institute for the Study of Labor (IZA).
  4. Erzo F.P. Luttmer, 2004. "Neighbors as Negatives: Relative Earnings and Well-Being," NBER Working Papers 10667, National Bureau of Economic Research, Inc.
  5. Praag, B.M.S. van & Herwaarden, F.G. van & Kapteyn, A.J., 1978. "Individual welfare functions and social reference spaces," Open Access publications from Tilburg University urn:nbn:nl:ui:12-361901, Tilburg University.
  6. Christoph Wunder & Andrea Wiencierz & Johannes Schwarze & Helmut Küchenhoff & Sara Kleyer & Philipp Bleninger, 2009. "Well-Being over the Life Span: Semiparametric Evidence from British and German Longitudinal Data," Discussion Papers of DIW Berlin 889, DIW Berlin, German Institute for Economic Research.
  7. Alois Stutzer, . "The Role of Income Aspirations in Individual Happiness," IEW - Working Papers 124, Institute for Empirical Research in Economics - University of Zurich.
  8. Dolan, Paul & Peasgood, Tessa & White, Mathew, 2008. "Do we really know what makes us happy A review of the economic literature on the factors associated with subjective well-being," Journal of Economic Psychology, Elsevier, vol. 29(1), pages 94-122, February.
  9. Bruno S. Frey & Alois Stutzer, . "What can Economists Learn from Happiness Research?," IEW - Working Papers 080, Institute for Empirical Research in Economics - University of Zurich.
  10. Ada Ferrer-i-Carbonell & Paul Frijters, 2004. "How Important is Methodology for the estimates of the determinants of Happiness?," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 114(497), pages 641-659, 07.
  11. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
  12. Ferrer-i-Carbonell, Ada & van Praag, Bernard M. S., 2003. "Income Satisfaction Inequality and its Causes," IZA Discussion Papers 854, Institute for the Study of Labor (IZA).
  13. Senik, Claudia, 2009. "Direct evidence on income comparisons and their welfare effects," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 408-424, October.
  14. Christoph Wunder & Andrea Wiencierz & Johannes Schwarze & Helmut Küchenhoff & Sara Kleyer & Philipp Bleninger, 2009. "Well-Being over the Life Span: Semiparametric Evidence from British and German Longitudinal Data," SOEPpapers on Multidisciplinary Panel Data Research 179, DIW Berlin, The German Socio-Economic Panel (SOEP).
  15. Clark, Andrew E. & Senik, Claudia, 2009. "Who Compares to Whom? The Anatomy of Income Comparisons in Europe," IZA Discussion Papers 4414, Institute for the Study of Labor (IZA).
  16. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2008. "Relative Income, Happiness, and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," Journal of Economic Literature, American Economic Association, vol. 46(1), pages 95-144, March.
  17. Hagenaars, Aldi J M & van Praag, Bernard M S, 1985. "A Synthesis of Poverty Line Definitions," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 31(2), pages 139-54, June.
  18. Senik, Claudia, 2004. "When information dominates comparison: Learning from Russian subjective panel data," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 2099-2123, August.
  19. Wunder, Christoph & Wiencierz, Andrea & Schwarze, Johannes & Küchenhoff, Helmut & Kleyer, Sara & Bleninger, Philipp, 2009. "Well-Being over the Life Span: Semiparametric Evidence from British and German Longitudinal Data," IZA Discussion Papers 4155, Institute for the Study of Labor (IZA).
  20. Carol Graham & Andrew Felton, 2006. "Inequality and happiness: Insights from Latin America," Journal of Economic Inequality, Springer, vol. 4(1), pages 107-122, April.
  21. Van Praag, Bernard M.S., 1977. "The perception of welfare inequality," European Economic Review, Elsevier, vol. 10(2), pages 189-207.
  22. Easterlin, Richard A., 2006. "Life cycle happiness and its sources: Intersections of psychology, economics, and demography," Journal of Economic Psychology, Elsevier, vol. 27(4), pages 463-482, August.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Well-Being Inequality and Reference Groups – An Agenda for New Research
    by maximorossi in NEP-LTV blog on 2010-09-28 20:13:06
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Cited by:
  1. J.ntti, Markus & Kanbur, Ravi & Nyyss.l., Milla & Pirttil., Jukka, 2012. "Poverty and Welfare Measurement on the Basis of Prospect Theory," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  2. Barbara Dluhosch & Daniel Horgos, 2013. "Trading Up the Happiness Ladder," Social Indicators Research, Springer, vol. 113(3), pages 973-990, September.
  3. Cristina Bernini & Andrea Guizzardi & Giovanni Angelini, 2013. "DEA-Like Model and Common Weights Approach for the Construction of a Subjective Community Well-Being Indicator," Social Indicators Research, Springer, vol. 114(2), pages 405-424, November.
  4. Bernard Praag, 2011. "Well-being inequality and reference groups: an agenda for new research," Journal of Economic Inequality, Springer, vol. 9(1), pages 111-127, March.
  5. Silber, Jacques & Verme, Paolo, 2012. "Relative deprivation, reference groups and the assessment of standard of living," Policy Research Working Paper Series 5930, The World Bank.
  6. Lohmann, Steffen, 2013. "Information technologies and subjective well-being: Does the internet raise material aspirations?," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79708, Verein für Socialpolitik / German Economic Association.
  7. Owen, Ann & Phillips, Anne, 2013. "Education, income, and the distribution of happiness," MPRA Paper 49387, University Library of Munich, Germany.
  8. Ada Ferrer-i-Carbonell, 2013. "Happiness economics," SERIEs, Spanish Economic Association, vol. 4(1), pages 35-60, March.
  9. Leonardo Becchetti & Fabio Pisani, 2014. "Family Economic Well-Being, and (Class) Relative Wealth: An Empirical Analysis of Life Satisfaction of Secondary School Students in Three Italian Cities," Journal of Happiness Studies, Springer, vol. 15(3), pages 503-525, June.
  10. Andrew E. Clark & Sarah Flèche & Claudia Senik, 2012. "The Great Happiness Moderation," PSE Working Papers halshs-00707290, HAL.
  11. Wen-Chun Chang, 2013. "Climbing up the Social Ladders: Identity, Relative Income, and Subjective Well-being," Social Indicators Research, Springer, vol. 113(1), pages 513-535, August.
  12. Krzysztof Zagorski & Mariah Evans & Jonathan Kelley & Katarzyna Piotrowska, 2014. "Does National Income Inequality Affect Individuals’ Quality of Life in Europe? Inequality, Happiness, Finances, and Health," Social Indicators Research, Springer, vol. 117(3), pages 1089-1110, July.
  13. Edsel Beja, 2014. "Yet, Two More Revisions to the Human Development Index," Forum for Social Economics, Taylor & Francis Journals, vol. 43(1), pages 27-39, April.
  14. repec:hal:wpaper:halshs-00707290 is not listed on IDEAS

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