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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. 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.
  2. David G. Blanchflower & Andrew J. Oswald, 2000. "Well-Being Over Time in Britain and the USA," NBER Working Papers 7487, National Bureau of Economic Research, Inc.
  3. 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.
  4. 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).
  5. Carol Graham & Andrew Felton, 2006. "Inequality and happiness: Insights from Latin America," Journal of Economic Inequality, Springer, vol. 4(1), pages 107-122, April.
  6. Bruno S. Frey & Alois Stutzer, 2001. "What Can Economists Learn from Happiness Research?," CESifo Working Paper Series 503, CESifo Group Munich.
  7. Kapteyn, Arie & Van Praag, Bernard M. S. & Van Herwaarden, Floor G., 1978. "Individual welfare functions and social reference spaces," Economics Letters, Elsevier, vol. 1(2), pages 173-177.
  8. 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).
  9. Alois Stutzer, . "The Role of Income Aspirations in Individual Happiness," IEW - Working Papers 124, Institute for Empirical Research in Economics - University of Zurich.
  10. 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.
  11. 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.
  12. 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.
  13. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
  14. Erzo F. P. Luttmer, 2005. "Neighbors as Negatives: Relative Earnings and Well-Being," The Quarterly Journal of Economics, MIT Press, vol. 120(3), pages 963-1002, August.
  15. 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).
  16. 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).
  17. Ada Ferrer-i-Carbonell & Paul Frijters, 2004. "How Important is Methodology for the estimates of the determinants of Happiness?," Economic Journal, Royal Economic Society, vol. 114(497), pages 641-659, 07.
  18. 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.
  19. 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.
  20. 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.
  21. Van Praag, Bernard M.S., 1977. "The perception of welfare inequality," European Economic Review, Elsevier, vol. 10(2), pages 189-207.
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Citations

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Cited by:
  1. 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.
  2. Andrew E. Clark & Sarah Flèche & Claudia Senik, 2012. "The Great Happiness Moderation," SOEPpapers on Multidisciplinary Panel Data Research 468, DIW Berlin, The German Socio-Economic Panel (SOEP).
  3. Markus Jäntti & Ravi Kanbur & Milla Nyyssölä & Jukka Pirttilä, 2013. "Poverty and Welfare Measurement on the Basis of Prospect Theory," CESifo Working Paper Series 4095, CESifo Group Munich.
  4. Andrew E. Clark & Sarah Flèche & Claudia Senik, 2012. "The Great Happiness Moderation," Working Papers halshs-00707290, HAL.

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