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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. Paolo Verme, 2010. "Relative labour deprivation and urban migration in Turkey," Journal of Economic Inequality, Springer, Springer, vol. 8(4), pages 391-408, December.
  2. Hey, John D & Lambert, Peter J, 1980. "Relative Deprivation and the Gini Coefficient: Comment," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 95(3), pages 567-73, November.
  3. Kakwani, Nanak, 1984. "The Relative Deprivation Curve and Its Applications," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 2(4), pages 384-94, October.
  4. Paolo Verme & Rima Izem, 2008. "Relative Deprivation with Imperfect Information," Economics Bulletin, AccessEcon, vol. 4(7), pages 1-9.
  5. Clark, Andrew E. & Senik, Claudia, 2009. "Who Compares to Whom? The Anatomy of Income Comparisons in Europe," CEPREMAP Working Papers (Docweb), CEPREMAP 0907, CEPREMAP.
  6. McBride, Michael, 2001. "Relative-income effects on subjective well-being in the cross-section," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 45(3), pages 251-278, July.
  7. Bernard Praag, 2011. "Well-being inequality and reference groups: an agenda for new research," Journal of Economic Inequality, Springer, Springer, vol. 9(1), pages 111-127, March.
  8. Ed Hopkins, 2008. "Inequality, happiness and relative concerns: What actually is their relationship?," Journal of Economic Inequality, Springer, Springer, vol. 6(4), pages 351-372, December.
  9. Yitzhaki, Shlomo, 1979. "Relative Deprivation and the Gini Coefficient," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 93(2), pages 321-24, May.
  10. Clark, Andrew E. & Oswald, Andrew J., 1996. "Satisfaction and comparison income," Journal of Public Economics, Elsevier, Elsevier, vol. 61(3), pages 359-381, September.
  11. Bossert, Walter & D'Ambrosio, Conchita, 2006. "Reference groups and individual deprivation," Economics Letters, Elsevier, Elsevier, vol. 90(3), pages 421-426, March.
  12. Blanchflower, David G. & Oswald, Andrew J., 2001. "Well-Being Over Time in Britain and the USA," The Warwick Economics Research Paper Series (TWERPS), University of Warwick, Department of Economics 616, University of Warwick, Department of Economics.
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  14. Larry Samuelson, 2004. "Information-Based Relative Consumption Effects," Econometrica, Econometric Society, Econometric Society, vol. 72(1), pages 93-118, 01.
  15. Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 104(424), pages 648-59, May.
  16. Kohei Kawamura, 2008. "Inequality, Happiness and Relative Concerns: What Actually is their Relationship?," ESE Discussion Papers, Edinburgh School of Economics, University of Edinburgh 182, Edinburgh School of Economics, University of Edinburgh.
  17. repec:ebl:ecbull:v:4:y:2008:i:9:p:1-7 is not listed on IDEAS
  18. Yitzhaki, Shlomo, 1982. "Relative deprivation and economic welfare," European Economic Review, Elsevier, Elsevier, vol. 17(1), pages 99-113.
  19. Kakwani, Nanak, 1984. "The Relative Deprivation Curve and Its Applications: Reply," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 2(4), pages 400-405, October.
  20. Ferrer-i-Carbonell, Ada, 2005. "Income and well-being: an empirical analysis of the comparison income effect," Journal of Public Economics, Elsevier, Elsevier, vol. 89(5-6), pages 997-1019, June.
  21. Jacques SILBER & Michal Weber, 2008. "The Generalized Gini index and the measurement of income mobility," Economics Bulletin, AccessEcon, vol. 4(9), pages 1-7.
  22. Hopkins, Ed, 2008. "Inequality, Happiness and Relative Concerns: What Actually is their Relationship?," SIRE Discussion Papers, Scottish Institute for Research in Economics (SIRE) 2008-01, Scottish Institute for Research in Economics (SIRE).
  23. 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, MIT Press, vol. 100(3), pages 807-10, August.
  24. Donaldson, David & Weymark, John A., 1980. "A single-parameter generalization of the Gini indices of inequality," Journal of Economic Theory, Elsevier, Elsevier, vol. 22(1), pages 67-86, February.
  25. Luis Rayo & Gary S. Becker, 2007. "Habits, Peers, and Happiness: An Evolutionary Perspective," American Economic Review, American Economic Association, American Economic Association, vol. 97(2), pages 487-491, May.
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Cited by:
  1. Marek Kośny, 2012. "Relative Income Changes and an Identification of Growth Pattern," Working Papers, ECINEQ, Society for the Study of Economic Inequality 268, ECINEQ, Society for the Study of Economic Inequality.
  2. Lee, Won Fy, 2012. "The Effect of Relative Income in the Dynamics of Migration: Evidence from the VHLSS Panel Data," Master's Theses, University of Minnesota, Department of Applied Economics 142096, University of Minnesota, Department of Applied Economics.

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