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Reference group consumption and the subjective wellbeing of the poor in Peru

  • Guillen-Royo, Monica
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    This paper studies the relationship between the consumption of the reference group and people's subjective wellbeing in seven poor Peruvian communities. It presents an empirical analysis of the importance of relative consumption for people's feelings of adequacy in five consumption domains (food, housing, education, clothes and health care). Against the assumption that relative consumption only matters for the rich and drawing on recent empirical work in Latin America, the study hypothesises that participants are likely to be influenced by the level of consumption of the area where they live when evaluating their situation. The data come from two surveys implemented in 2004 and 2005 in Peru by the Wellbeing in Developing Countries (WeD), ESRC research group at the University of Bath. The results indicate a negative effect of relative consumption on participants' appraisal of their households' clothes, housing and children's education. However, the study also shows that in domains linked to the need for physical health such as health care and food, appraisals are made based on households' objective situations and that the average consumption in the community does not play a significant role.

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    Article provided by Elsevier in its journal Journal of Economic Psychology.

    Volume (Year): 32 (2011)
    Issue (Month): 2 (March)
    Pages: 259-272

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    Handle: RePEc:eee:joepsy:v:32:y:2011:i:2:p:259-272
    Contact details of provider: Web page: http://www.elsevier.com/locate/joep

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    1. Monica Guillen-Royo, 2008. "Consumption and Subjective Wellbeing: Exploring Basic Needs, Social Comparison, Social Integration and Hedonism in Peru," Social Indicators Research, Springer, vol. 89(3), pages 535-555, December.
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    4. Guglielmo Maria Caporale & Yannis Georgellis & Nicholas Tsitsianis & Ya Ping Yin, 2007. "Income and Happiness across Europe: Do Reference Values Matter?," CESifo Working Paper Series 2146, CESifo Group Munich.
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    16. 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.
    17. Fafchamps, Marcel & Shilpi, Forhad, 2006. "Isolation and Subjective Welfare," CEPR Discussion Papers 6001, C.E.P.R. Discussion Papers.
    18. Carol Graham & Andrew Felton, 2006. "Inequality and happiness: Insights from Latin America," Journal of Economic Inequality, Springer, vol. 4(1), pages 107-122, April.
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