IDEAS home Printed from https://ideas.repec.org/a/bla/revinw/v65y2019i2p217-238.html
   My bibliography  Save this article

Neighbors' Income, Public Goods, and Well‐Being

Author

Listed:
  • Abel Brodeur
  • Sarah Flèche

Abstract

How does neighbors' income affect individual well‐being? Our analysis is based on rich U.S. local data from the Behavioral Risk Factor Surveillance System, which contains information on where respondents live and their self‐reported well‐being. We find that the effect of neighbors' income on individuals' self‐reported well‐being varies with the size of the neighborhood included. In smaller areas such as ZIP codes, we find a positive relationship between median income and individuals' life satisfaction, whereas it is the opposite at the county, MSA, and state levels. We provide evidence that local public goods and local area characteristics such as unemployment, criminality, and poverty rates drive the association between satisfaction and neighbors' income at the ZIP code level. The neighbors' income effects are mainly concentrated among poorer individuals and are as large as one quarter of the effect of own income on self‐reported well‐being.

Suggested Citation

  • Abel Brodeur & Sarah Flèche, 2019. "Neighbors' Income, Public Goods, and Well‐Being," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 65(2), pages 217-238, June.
  • Handle: RePEc:bla:revinw:v:65:y:2019:i:2:p:217-238
    DOI: 10.1111/roiw.12367
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/roiw.12367
    Download Restriction: no

    File URL: https://libkey.io/10.1111/roiw.12367?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Pischke, Jörn-Steffen, 2011. "Money and Happiness: Evidence from the Industry Wage Structure," CEPR Discussion Papers 8409, C.E.P.R. Discussion Papers.
    2. Gundi Knies & Simon Burgess & Carol Propper, 2008. "Keeping up with the Schmidt`s – An Empirical Test of Relative Deprivation Theory in the Neighbourhood Context," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 128(1), pages 75-108.
    3. 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.
    4. Kingdon, Geeta Gandhi & Knight, John, 2007. "Community, comparisons and subjective well-being in a divided society," Journal of Economic Behavior & Organization, Elsevier, vol. 64(1), pages 69-90, September.
    5. Betsey Stevenson & Justin Wolfers, 2013. "Subjective Well-Being and Income: Is There Any Evidence of Satiation?," American Economic Review, American Economic Association, vol. 103(3), pages 598-604, May.
    6. Joerg Dittmann & Jan Goebel, 2010. "Your House, Your Car, Your Education: The Socioeconomic Situation of the Neighborhood and its Impact on Life Satisfaction in Germany," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 96(3), pages 497-513, May.
    7. 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.
    8. Guy Mayraz & Jürgen Schupp & Gert G. Wagner, 2009. "Life Satisfaction and Relative Income: Perceptions and Evidence," CEP Discussion Papers dp0938, Centre for Economic Performance, LSE.
    9. Van Praag, Bernard, 1971. "The welfare function of income in Belgium: An empirical investigation," European Economic Review, Elsevier, vol. 11(3), pages 337-369.
    10. AndrewE. Clark & Claudia Senik, 2010. "Who Compares to Whom? The Anatomy of Income Comparisons in Europe," Economic Journal, Royal Economic Society, vol. 120(544), pages 573-594, May.
    11. Betsey Stevenson & Justin Wolfers, 2012. "Subjective and Objective Indicators of Racial Progress," The Journal of Legal Studies, University of Chicago Press, vol. 41(2), pages 459-493.
    12. Jörn-Steffen Pischke & Hannes Schwandt, 2012. "A Cautionary Note on Using Industry Affiliation to Predict Income," NBER Working Papers 18384, National Bureau of Economic Research, Inc.
    13. Bruno S. Frey & Alois Stutzer, 2002. "What Can Economists Learn from Happiness Research?," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 402-435, June.
    14. Easterlin, Richard A, 2001. "Income and Happiness: Towards an Unified Theory," Economic Journal, Royal Economic Society, vol. 111(473), pages 465-484, July.
    15. George J. Stigler, 1950. "The Development of Utility Theory. II," Journal of Political Economy, University of Chicago Press, vol. 58, pages 373-373.
    16. Frank, Robert H, 1985. "The Demand for Unobservable and Other Nonpositional Goods," American Economic Review, American Economic Association, vol. 75(1), pages 101-116, March.
    17. Abel Brodeur, 2012. "Smoking, Income and Subjective Well-Being: Evidence from Smoking Bans," Working Papers halshs-00664269, HAL.
    18. Albert O. Hirschman & Michael Rothschild, 1973. "The Changing Tolerance for Income Inequality in the Course of Economic DevelopmentWith A Mathematical Appendix," The Quarterly Journal of Economics, Oxford University Press, vol. 87(4), pages 544-566.
    19. David Card & Alexandre Mas & Enrico Moretti & Emmanuel Saez, 2012. "Inequality at Work: The Effect of Peer Salaries on Job Satisfaction," American Economic Review, American Economic Association, vol. 102(6), pages 2981-3003, October.
    20. Sacks, Daniel W. & Stevenson, Betsey & Wolfers, Justin, 2012. "The New Stylized Facts about Income and Subjective Well-Being," IZA Discussion Papers 7105, Institute of Labor Economics (IZA).
    21. Angus Deaton & Arthur A. Stone, 2013. "Two Happiness Puzzles," American Economic Review, American Economic Association, vol. 103(3), pages 591-597, May.
      • Arthur A. Stone & Angus Deaton, 2013. "Two happiness puzzles," Working Papers 2013-3, Princeton University, Woodrow Wilson School of Public and International Affairs, Center for Health and Wellbeing..
    22. De Neve, Jan-Emmanuel & Oswald, Andrew J., 2012. "Estimating the influence of life satisfaction and positive affect on later income using sibling fixed-effects," LSE Research Online Documents on Economics 51523, London School of Economics and Political Science, LSE Library.
    23. van de Stadt, Huib & Kapteyn, Arie & van de Geer, Sara, 1985. "The Relativity of Utility: Evidence from Panel Data," The Review of Economics and Statistics, MIT Press, vol. 67(2), pages 179-187, May.
    24. Betsey Stevenson & Justin Wolfers, 2008. "Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(1 (Spring), pages 1-102.
    25. John F. Helliwell & Haifang Huang, 2014. "New Measures Of The Costs Of Unemployment: Evidence From The Subjective Well-Being Of 3.3 Million Americans," Economic Inquiry, Western Economic Association International, vol. 52(4), pages 1485-1502, October.
    26. Daniel J. Benjamin & Ori Heffetz & Miles S. Kimball & Alex Rees-Jones, 2012. "What Do You Think Would Make You Happier? What Do You Think You Would Choose?," American Economic Review, American Economic Association, vol. 102(5), pages 2083-2110, August.
    27. KNIGHT, John & SONG, Lina & GUNATILAKA, Ramani, 2009. "Subjective well-being and its determinants in rural China," China Economic Review, Elsevier, vol. 20(4), pages 635-649, December.
    28. George C. Galster, 2008. "Quantifying the Effect of Neighbourhood on Individuals: Challenges, Alternative Approaches, and Promising Directions," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 128(1), pages 7-48.
    29. Andrew E. Clark & Nicolai Kristensen & Niels Westergård-Nielsen, 2009. "Economic Satisfaction and Income Rank in Small Neighbourhoods," Journal of the European Economic Association, MIT Press, vol. 7(2-3), pages 519-527, 04-05.
    30. Gundi Knies, 2012. "Income Comparisons Among Neighbours and Satisfaction in East and West Germany," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 106(3), pages 471-489, May.
    31. Clark, Andrew E. & Oswald, Andrew J., 1996. "Satisfaction and comparison income," Journal of Public Economics, Elsevier, vol. 61(3), pages 359-381, September.
    32. Brodeur, Abel & Flèche, Sarah, 2013. "Where the Streets Have a Name: Income Comparisons in the US," IZA Discussion Papers 7256, Institute of Labor Economics (IZA).
    33. Oswald, Andrew J. & Wu, Stephen, 2010. "Objective Confirmation of Subjective Measures of Human Well-being: Evidence from the USA," IZA Discussion Papers 4695, Institute of Labor Economics (IZA).
    34. Hirschman, Albert O., 1973. "The changing tolerance for income inequality in the course of economic development," World Development, Elsevier, vol. 1(12), pages 29-36, December.
    35. Raj Chetty & Nathaniel Hendren & Lawrence F. Katz, 2016. "The Effects of Exposure to Better Neighborhoods on Children: New Evidence from the Moving to Opportunity Experiment," American Economic Review, American Economic Association, vol. 106(4), pages 855-902, April.
    36. Rafael Di Tella & Robert MacCulloch, 2006. "Some Uses of Happiness Data in Economics," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 25-46, Winter.
    37. Erzo F. P. Luttmer, 2005. "Neighbors as Negatives: Relative Earnings and Well-Being," The Quarterly Journal of Economics, Oxford University Press, vol. 120(3), pages 963-1002.
    38. Eugenio Proto & Aldo Rustichini, 2013. "A Reassessment of the Relationship between GDP and Life Satisfaction," PLOS ONE, Public Library of Science, vol. 8(11), pages 1-10, November.
    39. James M. Poterba, 1997. "Demographic structure and the political economy of public education," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 16(1), pages 48-66.
    40. Easterlin, Richard A., 1995. "Will raising the incomes of all increase the happiness of all?," Journal of Economic Behavior & Organization, Elsevier, vol. 27(1), pages 35-47, June.
    41. Daniel J. Benjamin & Ori Heffetz & Miles S. Kimball & Nichole Szembrot, 2014. "Beyond Happiness and Satisfaction: Toward Well-Being Indices Based on Stated Preference," American Economic Review, American Economic Association, vol. 104(9), pages 2698-2735, September.
    42. Gardner, Jonathan & Oswald, Andrew J., 2007. "Money and mental wellbeing: A longitudinal study of medium-sized lottery wins," Journal of Health Economics, Elsevier, vol. 26(1), pages 49-60, January.
    43. Paul Frijters & John P. Haisken-DeNew & Michael A. Shields, 2004. "Money Does Matter! Evidence from Increasing Real Income and Life Satisfaction in East Germany Following Reunification," American Economic Review, American Economic Association, vol. 94(3), pages 730-740, June.
    44. Ludwig, Jens & Duncan, Greg J. & Katz, Lawrence F. & Kessler, Ronald & Kling, Jeffrey R. & Gennetian, Lisa A. & Sanbonmatsu, Lisa, 2012. "Neighborhood Effects on the Long-Term Well-Being of Low-Income Adults," Scholarly Articles 11870359, Harvard University Department of Economics.
    45. Sendhil Mullainathan & Marianne Bertrand, 2001. "Do People Mean What They Say? Implications for Subjective Survey Data," American Economic Review, American Economic Association, vol. 91(2), pages 67-72, May.
    46. Christopher P. Barrington-Leigh & John F. Helliwell, 2008. "Empathy and Emulation: Life Satisfaction and the Urban Geography of Comparison Groups," NBER Working Papers 14593, National Bureau of Economic Research, Inc.
    47. Easterlin, Richard A., 1974. "Does Economic Growth Improve the Human Lot? Some Empirical Evidence," MPRA Paper 111773, University Library of Munich, Germany.
    48. Layard, Richard, 1980. "Human Satisfactions and Public Policy," Economic Journal, Royal Economic Society, vol. 90(363), pages 737-750, December.
    49. repec:hrv:faseco:30367426 is not listed on IDEAS
    50. 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.
    51. John Helliwell, 2001. "Social Capital, the Economy and Well-being," The Review of Economic Performance and Social Progress, in: Andrew Sharpe, Executive Director & France St-Hilaire, Vice-President , Research & Keith Banting, Di (ed.), The Review of Economic Performance and Social Progress 2001: The Longest Decade: Canada in the 1990s, volume 1, Centre for the Study of Living Standards;The Institutute for Research on Public Policy.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Tiffany S. Neman, 2020. "Does Your Neighborhood’s Income Distribution Matter? A Multi-scale Study of Financial Well-Being in the U.S," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 152(3), pages 951-970, December.
    2. Thanasis Ziogas & Dimitris Ballas & Sierdjan Koster & Arjen Edzes, 2020. "How happy are my neighbours? Modelling spatial spillover effects of well-being," Papers 2007.11580, arXiv.org.
    3. Noy, Shakked & Sin, Isabelle, 2021. "The effects of neighbourhood and workplace income comparisons on subjective wellbeing," Journal of Economic Behavior & Organization, Elsevier, vol. 185(C), pages 918-945.
    4. Zhijian Zhang & Xueyuan Wang, 0. "Ambition or Jealousy? It Depends on Whom you are Compared with," Journal of Happiness Studies, Springer, vol. 0, pages 1-27.
    5. Leonardo Becchetti & Fabio Pisani, 2021. "When Money Matters More: Long‐Term Illness and the Income/Life Satisfaction Slope," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 67(3), pages 616-638, September.
    6. Fumagalli, Elena & Fumagalli, Laura, 2022. "Subjective well-being and the gender composition of the reference group: Evidence from a survey experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 194(C), pages 196-219.
    7. John Ifcher & Homa Zarghamee & Dan Houser & Lina Diaz, 2020. "The relative income effect: an experiment," Experimental Economics, Springer;Economic Science Association, vol. 23(4), pages 1205-1234, December.
    8. Seonghoon Kim & Andrew J. Oswald, 2021. "Happy Lottery Winners and Lottery‐Ticket Bias," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 67(2), pages 317-333, June.
    9. Zhijian Zhang & Xueyuan Wang, 2021. "Ambition or Jealousy? It Depends on Whom you are Compared with," Journal of Happiness Studies, Springer, vol. 22(3), pages 1189-1215, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Abel Brodeur & Sarah Flèche, 2013. "Where the Streets Have a Name: Income Comparisons in the US," CEP Discussion Papers dp1196, Centre for Economic Performance, LSE.
    2. Fengyu Wu, 2020. "An Examination of the Effects of Consumption Expenditures on Life Satisfaction in Australia," Journal of Happiness Studies, Springer, vol. 21(8), pages 2735-2771, December.
    3. Andrew E. Clark & Claudia Senik, 2010. "Will GDP growth increase happiness in developing countries?," PSE Working Papers halshs-00564985, HAL.
    4. Ifcher, John & Zarghamee, Homa & Graham, Carol, 2018. "Local neighbors as positives, regional neighbors as negatives: Competing channels in the relationship between others’ income, health, and happiness," Journal of Health Economics, Elsevier, vol. 57(C), pages 263-276.
    5. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2006. "Income and happiness: Evidence, explanations and economic implications," Working Papers halshs-00590436, HAL.
    6. Yamada, Katsunori & Sato, Masayuki, 2013. "Another avenue for anatomy of income comparisons: Evidence from hypothetical choice experiments," Journal of Economic Behavior & Organization, Elsevier, vol. 89(C), pages 35-57.
    7. Hajdu, Tamás & Hajdu, Gábor, 2011. "A hasznosság és a relatív jövedelem kapcsolatának vizsgálata magyar adatok segítségével [Examining the relation of utility and relative income using Hungarian data]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(1), pages 56-73.
    8. Diriwaechter, Patric & Shvartsman, Elena, 2018. "The anticipation and adaptation effects of intra- and interpersonal wage changes on job satisfaction," Journal of Economic Behavior & Organization, Elsevier, vol. 146(C), pages 116-140.
    9. Sun Youn Lee & Fumio Ohtake, 2021. "How Conscious Are You of Others? Further Evidence on Relative Income and Happiness," Journal of Happiness Studies, Springer, vol. 22(8), pages 3321-3356, December.
    10. 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.
    11. Clark, Andrew E. & D'Ambrosio, Conchita, 2014. "Attitudes to Income Inequality: Experimental and Survey Evidence," IZA Discussion Papers 8136, Institute of Labor Economics (IZA).
    12. Cai, Shu & Park, Albert, 2016. "Permanent income and subjective well-being," Journal of Economic Behavior & Organization, Elsevier, vol. 130(C), pages 298-319.
    13. Filiz Gülal & Adam Ayaita, 2020. "The Impact of Minimum Wages on Well-Being: Evidence from a Quasi-experiment in Germany," Journal of Happiness Studies, Springer, vol. 21(7), pages 2669-2692, October.
    14. Wen-Chun Chang, 2013. "Climbing up the Social Ladders: Identity, Relative Income, and Subjective Well-being," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 113(1), pages 513-535, August.
    15. Corazzini, Luca & Esposito, Lucio & Majorano, Francesca, 2012. "Reign in hell or serve in heaven? A cross-country journey into the relative vs absolute perceptions of wellbeing," Journal of Economic Behavior & Organization, Elsevier, vol. 81(3), pages 715-730.
    16. Muhammad Faress Bhuiyan, 2018. "Life Satisfaction and Economic Position Relative to Neighbors: Perceptions Versus Reality," Journal of Happiness Studies, Springer, vol. 19(7), pages 1935-1964, October.
    17. Van Landeghem, Bert & Vandeplas, Anneleen, 2018. "The relationship between status and happiness: Evidence from the caste system in rural India," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 77(C), pages 62-71.
    18. O'Donnell, Gus & Oswald, Andrew J., 2015. "National well-being policy and a weighted approach to human feelings," Ecological Economics, Elsevier, vol. 120(C), pages 59-70.
    19. Di Tella, Rafael & Haisken-De New, John & MacCulloch, Robert, 2010. "Happiness adaptation to income and to status in an individual panel," Journal of Economic Behavior & Organization, Elsevier, vol. 76(3), pages 834-852, December.
    20. Jantsch, Antje & Le Blanc, Julia & Schmidt, Tobias, 2022. "Wealth and subjective well-being in Germany," Discussion Papers 11/2022, Deutsche Bundesbank.

    More about this item

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:revinw:v:65:y:2019:i:2:p:217-238. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/iariwea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/iariwea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.