Ambition or Jealousy? It Depends on Whom you are Compared with

Using panel data from a nationally representative survey in China, this paper simultaneously examines the impact of relative status of reference points from various categories on individual happiness. We find strong evidence supporting asymmetric and adaptation effects in internal comparisons. The marginal effect of current absolute status decreases as achieved relative status rises, and future (positive) status changes matter more than current (negative) status changes, respectively. With respect to external comparisons, the results suggest that relative status of both spatial and predicted reference groups exerts a favorable influence on happiness, whereas those of social reference groups substantially decrease individual happiness. This result remains qualitatively unchanged even correcting for the possible endogeneity of the current absolute status and reference relative status. The two opposite effects are magnified when people are temporarily unemployed or experience high volatility of economic status. A series of further sensitivity tests are consistent with our tunnel and comparison effects conjecture but rule out some alternative explanations, despite suggestive rather than conclusive. Finally, the findings also survive a large set of robustness checks.