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

  • Silber, Jacques
  • Verme, Paolo

This paper proposes two new indices of relative deprivation, derived from an extension of the concept of generalized Gini to 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 (CHER), we check which of the various ways of defining individual deprivation best fits the answers given by individuals on the degree of their satisfaction with income. We find 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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Article provided by Elsevier in its journal Economic Systems.

Volume (Year): 36 (2012)
Issue (Month): 1 ()
Pages: 31-45

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Handle: RePEc:eee:ecosys:v:36:y:2012:i:1:p:31-45
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  1. 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.
  2. BOSSERT, Walter & D'AMBROSIO, Conchita, 2004. "Reference Groups and Individual Deprivation," Cahiers de recherche 2004-10, Universite de Montreal, Departement de sciences economiques.
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  4. van Praag, Bernard M. S., 2010. "Well-being Inequality and Reference Groups: An Agenda for New Research," IZA Discussion Papers 4727, Institute for the Study of Labor (IZA).
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  11. 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.
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  17. Paolo Verme & Rima Izem, 2008. "Relative Deprivation with Imperfect Information," Economics Bulletin, AccessEcon, vol. 4(7), pages 1-9.
  18. 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.
  19. Paolo Verme, 2010. "Relative labour deprivation and urban migration in Turkey," Journal of Economic Inequality, Springer, vol. 8(4), pages 391-408, December.
  20. Jacques SILBER & Michal Weber, 2008. "The Generalized Gini index and the measurement of income mobility," Economics Bulletin, AccessEcon, vol. 4(9), pages 1-7.
  21. 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.
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  24. 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.
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