A Curse of Comparison? Evidence on Reference Groups for Relative Income Concerns
AbstractThis paper proposes that individuals care about the relative income of proximate reference groups. Making use of self-reported life satisfaction as a proxy for unobservable utility, the relative income of siblings is tested for relevance as a reference point for new sample data from Venezuela. Having greater perceived income than one's siblings is found to be positively linked to individual life satisfaction. This evidence supplements the scarce economic research on reference groups, supporting the hypothesis that individuals with proximate characteristics and resembling opportunities in life serve as points of comparison.
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Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 4820.
Length: 31 pages
Date of creation: 01 Jan 2009
Date of revision:
reference groups; relative income; life satisfaction;
Find related papers by JEL classification:
- D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-02-14 (All new papers)
- NEP-DEV-2009-02-14 (Development)
- NEP-IAS-2009-02-14 (Insurance Economics)
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