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Keeping up with the Joneses by finding a better-paid job - The effect of relative income on job mobility

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  • Kristin Kronenberg

    ()

  • Tobias Kronenberg

    ()

Abstract

It has been shown that a person’s relative income – compared to a reference group – has a negative impact on self-reported happiness. This suggests that people who aim at increasing their happiness should try to find a better-paid job if their relative income is low. In this paper we study this hypothesis by estimating the effect of relative income on job mobility, using a dataset containing information on roughly four million Dutch employees. We consider three different reference groups: people who live in the same neighborhood, people who work for the same employer, and people who share certain demographic characteristics. Our findings suggest that workers compare their own income to that of their neighbors, and low relative income is associated with higher job mobility. We conclude that low relative income (compared to the neighbors) reduces workers’ happiness, and workers react to this by finding a new job which may offer the prospect of higher pay.

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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa11p1445.

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Date of creation: Sep 2011
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Handle: RePEc:wiw:wiwrsa:ersa11p1445

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  1. Linneman, Peter & Graves, Philip E., 1983. "Migration and job change: A multinomial logit approach," Journal of Urban Economics, Elsevier, vol. 14(3), pages 263-279, November.
  2. 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.
  3. Adele Bergin, 2008. "Job Mobility in Ireland," Economics, Finance and Accounting Department Working Paper Series, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth n1940708.pdf, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
  4. Clark, Andrew E. & Kristensen, Nicolai & Westergaard-Nielsen, Niels, 2008. "Economic Satisfaction and Income Rank in Small Neighbourhoods," Working Papers, University of Aarhus, Aarhus School of Business, Department of Economics 08-25, University of Aarhus, Aarhus School of Business, Department of Economics.
  5. Erzo F.P. Luttmer, 2004. "Neighbors as Negatives: Relative Earnings and Well-Being," NBER Working Papers 10667, National Bureau of Economic Research, Inc.
  6. repec:hal:wpaper:halshs-00586254 is not listed on IDEAS
  7. Veblen, Thorstein, 1899. "The Theory of the Leisure Class," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, McMaster University Archive for the History of Economic Thought, number veblen1899.
  8. Bergin, Adele, 2009. "Job Mobility in Ireland," The Economic and Social Review, Economic and Social Studies, Economic and Social Studies, vol. 40(1), pages 15-47.
  9. Veblen, Thorstein, 2009. "The Theory of the Leisure Class," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780199552580 edited by Banta, Martha, October.
  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. 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.
  12. Becker, Gary S, 1981. "Altruism in the Family and Selfishness in the Market Place," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 48(189), pages 1-15, February.
  13. repec:pse:psecon:2008-44 is not listed on IDEAS
  14. Thorstein Veblen, 1899. "Mr. Cummings's Strictures on "The Theory of the Leisure Class"," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 8, pages 106.
  15. Kronenberg, Kristin & Carree, Martin, 2010. "Job and residential mobility in the Netherlands: the influence of human capital, household composition and location," MPRA Paper 25840, University Library of Munich, Germany.
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