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Relative deprivation, reference groups and the assessment of standard of living

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  • Silber, Jacques
  • Verme, Paolo

Abstract

This paper proposes two new indices of relative deprivation, derived from an extension of the concept of the generalized Gini for the measurement of distributional change. Population- and income-weighted relative deprivation indices are then defined and, using panel data from the Consortium of Household Panels for European Socio-Economic Research, this paper checks which of the various ways of defining individual deprivation best fits the answers given by individuals on the degree of their satisfaction with income. The analysis finds that the deprivation indices proposed are consistently and negatively correlated with income satisfaction as reported by respondents, that income weighted measures fit better than population weighted measures, and that this fit improves with countries that experienced deep institutional changes such as the transitional economies of Eastern Europe.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 5930.

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Date of creation: 01 Jan 2012
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Handle: RePEc:wbk:wbrwps:5930

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Keywords: Inequality; Economic Theory&Research; Poverty Impact Evaluation; Labor Policies; Emerging Markets;

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References

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  1. 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).
  2. Hopkins, Ed, 2008. "Inequality, Happiness and Relative Concerns: What Actually is their Relationship?," SIRE Discussion Papers 2008-01, Scottish Institute for Research in Economics (SIRE).
  3. Kakwani, Nanak, 1984. "The Relative Deprivation Curve and Its Applications," Journal of Business & Economic Statistics, American Statistical Association, vol. 2(4), pages 384-94, October.
  4. 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.
  5. 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.
  6. Berrebi, Z M & Silber, Jacques, 1985. "Income Inequality Indices and Deprivation: A Generalization [Relative Deprivation and the Gini Coefficient]," The Quarterly Journal of Economics, MIT Press, vol. 100(3), pages 807-10, August.
  7. Paolo Verme, 2010. "Relative labour deprivation and urban migration in Turkey," Journal of Economic Inequality, Springer, vol. 8(4), pages 391-408, December.
  8. Hey, John D & Lambert, Peter J, 1980. "Relative Deprivation and the Gini Coefficient: Comment," The Quarterly Journal of Economics, MIT Press, vol. 95(3), pages 567-73, November.
  9. Kohei Kawamura, 2008. "Inequality, Happiness and Relative Concerns: What Actually is their Relationship?," ESE Discussion Papers 182, Edinburgh School of Economics, University of Edinburgh.
  10. Yitzhaki, Shlomo, 1979. "Relative Deprivation and the Gini Coefficient," The Quarterly Journal of Economics, MIT Press, vol. 93(2), pages 321-24, May.
  11. Kakwani, Nanak, 1984. "The Relative Deprivation Curve and Its Applications: Reply," Journal of Business & Economic Statistics, American Statistical Association, vol. 2(4), pages 400-405, October.
  12. Bernard M.S. Van Praag, 2010. "Well-being Inequality and Reference Groups - An Agenda for New Research," CESifo Working Paper Series 2984, CESifo Group Munich.
  13. Andrew E. Clark and Andrew J. Oswald, . "Satisfaction and Comparison Income," Economics Discussion Papers 419, University of Essex, Department of Economics.
  14. repec:ebl:ecbull:v:4:y:2008:i:7:p:1-9 is not listed on IDEAS
  15. Luis Rayo & Gary S. Becker, 2007. "Habits, Peers, and Happiness: An Evolutionary Perspective," American Economic Review, American Economic Association, vol. 97(2), pages 487-491, May.
  16. Yitzhaki, Shlomo, 1982. "Relative deprivation and economic welfare," European Economic Review, Elsevier, vol. 17(1), pages 99-113.
  17. BOSSERT, Walter & D’AMBROSIO, Conchita, 2004. "Reference Groups and Individual Deprivation," Cahiers de recherche 13-2004, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  18. Donaldson, David & Weymark, John A., 1980. "A single-parameter generalization of the Gini indices of inequality," Journal of Economic Theory, Elsevier, vol. 22(1), pages 67-86, February.
  19. McBride, Michael, 2001. "Relative-income effects on subjective well-being in the cross-section," Journal of Economic Behavior & Organization, Elsevier, vol. 45(3), pages 251-278, July.
  20. repec:ebl:ecbull:v:4:y:2008:i:9:p:1-7 is not listed on IDEAS
  21. Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, vol. 104(424), pages 648-59, May.
  22. Jacques SILBER & Michal Weber, 2008. "The Generalized Gini index and the measurement of income mobility," Economics Bulletin, AccessEcon, vol. 4(9), pages 1-7.
  23. Paolo Verme & Rima Izem, 2008. "Relative Deprivation with Imperfect Information," Economics Bulletin, AccessEcon, vol. 4(7), pages 1-9.
  24. Larry Samuelson, 2004. "Information-Based Relative Consumption Effects," Econometrica, Econometric Society, vol. 72(1), pages 93-118, 01.
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Cited by:
  1. Lee, Won Fy, 2012. "The Effect of Relative Income in the Dynamics of Migration: Evidence from the VHLSS Panel Data," Master's Theses 142096, University of Minnesota, Department of Applied Economics.
  2. Marek Kośny, 2012. "Relative Income Changes and an Identification of Growth Pattern," Working Papers 268, ECINEQ, Society for the Study of Economic Inequality.

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