IDEAS home Printed from https://ideas.repec.org/a/spr/soinre/v179y2025i2d10.1007_s11205-025-03634-6.html
   My bibliography  Save this article

The Social Dynamics of Economic Comparisons: A Longitudinal Study on the Effects of Relative Wages on Subjective Well-Being Using Linked Survey and Register Data

Author

Listed:
  • Tilman Woerz

    (Friedrich Alexander University Erlangen-Nuremberg)

  • Matthias Collischon

    (PASS)

  • Tobias Wolbring

    (Friedrich Alexander University Erlangen-Nuremberg)

Abstract

The implications of wage distributions within firms have garnered increasing attention in recent research, particularly concerning their impact on employees’ subjective well-being. The existing literature, however, presents mixed findings, which may be attributed to the interplay of two opposing forces: social status comparison and the tunnel effect. In this paper, we aim to address this issue by examining the mechanisms underlying these forces. To accomplish this, we leverage a combination of panel study data and comprehensive register data on wage distributions within firms. Our primary hypotheses posit that higher average establishment wages contribute to improved subjective well-being (tunnel effect), whereas decreases in individual ranks lead to reduced well-being (social status comparison). Using fixed effects regressions, we explore these effects and their implications on both job satisfaction and life satisfaction. Our results highlight the complex dynamics surrounding wage distributions, indicating that they serve as indicators of future success and markers of social status within the specific organizational context. These findings shed light on the intricate relationship between wage distributions and subjective well-being, providing valuable insights for understanding the implications of wage disparities within firms.

Suggested Citation

  • Tilman Woerz & Matthias Collischon & Tobias Wolbring, 2025. "The Social Dynamics of Economic Comparisons: A Longitudinal Study on the Effects of Relative Wages on Subjective Well-Being Using Linked Survey and Register Data," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 179(2), pages 979-1001, September.
    • Handle: RePEc:spr:soinre:v:179:y:2025:i:2:d:10.1007_s11205-025-03634-6
    DOI: 10.1007/s11205-025-03634-6
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11205-025-03634-6
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s11205-025-03634-6?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
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Emily Breza & Supreet Kaur & Yogita Shamdasani, 2018. "The Morale Effects of Pay Inequality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 133(2), pages 611-663.
    2. Matthias Collischon, 2019. "Relative Pay, Rank and Happiness: A Comparison Between Genders and Part- and Full-Time Employees," Journal of Happiness Studies, Springer, vol. 20(1), pages 67-80, January.
    3. 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.
    4. 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.
    5. Felix FitzRoy & Michael Nolan & Max Steinhardt & David Ulph, 2014. "Testing the tunnel effect: comparison, age and happiness in UK and German panels," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-30, December.
    6. Axel Ockenfels & Dirk Sliwka & Peter Werner, 2015. "Bonus Payments and Reference Point Violations," Management Science, INFORMS, vol. 61(7), pages 1496-1513, July.
    7. 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, President and Fellows of Harvard College, vol. 87(4), pages 544-566.
    8. 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.
    9. Arindrajit Dube & Laura Giuliano & Jonathan Leonard, 2019. "Fairness and Frictions: The Impact of Unequal Raises on Quit Behavior," American Economic Review, American Economic Association, vol. 109(2), pages 620-663, February.
    10. AndrewE. Clark & Nicolai Kristensen & Niels Westergård-Nielsen, 2009. "Job Satisfaction and Co-worker Wages: Status or Signal?," Economic Journal, Royal Economic Society, vol. 119(536), pages 430-447, March.
    11. 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.
    12. Andrew E. Clark & Claudia Senik & Katsunori Yamada, 2022. "The Joneses in Japan: income comparisons and financial satisfaction," The Japanese Economic Review, Springer, vol. 73(2), pages 351-372, April.
    13. Alain Cohn & Ernst Fehr & Lorenz Goette, 2015. "Fair Wages and Effort Provision: Combining Evidence from a Choice Experiment and a Field Experiment," Management Science, INFORMS, vol. 61(8), pages 1777-1794, August.
    14. Clark, Andrew E. & Oswald, Andrew J., 1996. "Satisfaction and comparison income," Journal of Public Economics, Elsevier, vol. 61(3), pages 359-381, September.
    15. Easterlin, Richard A., 1974. "Does Economic Growth Improve the Human Lot? Some Empirical Evidence," MPRA Paper 111773, University Library of Munich, Germany.
    16. Xiaoyang Long & Javad Nasiry, 2020. "Wage Transparency and Social Comparison in Sales Force Compensation," Management Science, INFORMS, vol. 66(11), pages 5290-5315, November.
    17. Temesgen Kifle, 2014. "Do Comparison Wages Play a Major Role in Determining Overall Job Satisfaction? Evidence from Australia," Journal of Happiness Studies, Springer, vol. 15(3), pages 613-638, June.
    18. Easterlin, Richard A, 2001. "Income and Happiness: Towards an Unified Theory," Economic Journal, Royal Economic Society, vol. 111(473), pages 465-484, July.
    19. Hirsch, Seev, 1976. "An International Trade and Investment Theory of the Firm," Oxford Economic Papers, Oxford University Press, vol. 28(2), pages 258-270, July.
    20. Rodrigo Montero & Diego Vásquez, 2015. "Job Satisfaction and Reference Wages: Evidence for a Developing Country," Journal of Happiness Studies, Springer, vol. 16(6), pages 1493-1507, December.
    21. Card, David & Mas, Alexandre & Moretti, Enrico & Saez, Emmanuel, 2010. "Inequality at Work: The Effect of Peer Salaries on Job Satisfaction," Institute for Research on Labor and Employment, Working Paper Series qt48z7z9dn, Institute of Industrial Relations, UC Berkeley.
    22. Ada Ferrer-i-Carbonell & Paul Frijters, 2004. "How Important is Methodology for the estimates of the determinants of Happiness?," Economic Journal, Royal Economic Society, vol. 114(497), pages 641-659, July.
    23. Dolan, Paul & Peasgood, Tessa & White, Mathew, 2008. "Do we really know what makes us happy A review of the economic literature on the factors associated with subjective well-being," Journal of Economic Psychology, Elsevier, vol. 29(1), pages 94-122, February.
    24. 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.
    25. repec:hal:pseose:halshs-00754447 is not listed on IDEAS
    26. 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.
    Full references (including those not matched with items on IDEAS)

    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. 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.
    2. 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.
    3. 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.
    4. 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.
    5. Matthias Collischon, 2019. "Relative Pay, Rank and Happiness: A Comparison Between Genders and Part- and Full-Time Employees," Journal of Happiness Studies, Springer, vol. 20(1), pages 67-80, January.
    6. Stavros A. Drakopoulos, 2020. "Pay Level Comparisons in Job Satisfaction Research and Mainstream Economic Methodology," Journal of Happiness Studies, Springer, vol. 21(3), pages 825-842, March.
    7. Biswajit Banerjee & Peter Tóth, 2025. "Life Satisfaction and Inequality in Slovakia: The Role of Income, Consumption and Wealth," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 177(1), pages 93-126, March.
    8. Godechot, Olivier & Senik, Claudia, 2015. "Wage comparisons in and out of the firm. Evidence from a matched employer–employee French database," Journal of Economic Behavior & Organization, Elsevier, vol. 117(C), pages 395-410.
    9. Marcin Piekalkiewicz, 2016. "Money, Social Capital and Materialism. Evidence from Happiness Data," Department of Economics University of Siena 731, Department of Economics, University of Siena.
    10. Elena Bárcena-Martín & Cortés Aguilar Alexandra & Ana I. Moro Egido, 2013. "The role of proximity and social comparisons on subjective well-being," ThE Papers 13/10, Department of Economic Theory and Economic History of the University of Granada..
    11. Fontaine, Xavier & Yamada, Katsunori, 2014. "Caste Comparisons in India: Evidence From Subjective Well-Being Data," World Development, Elsevier, vol. 64(C), pages 407-419.
    12. Thomas Dufhues & Judith Möllers & Antje Jantsch & Gertrud Buchenrieder & Laura Camfield, 2023. "Don’t Look Up! Individual Income Comparisons and Subjective Well-Being of Students in Thailand," Journal of Happiness Studies, Springer, vol. 24(2), pages 477-503, February.
    13. Byela Tibesigwa & Martine Visser & Brennan Hodkinson, 2016. "Effects of Objective and Subjective Income Comparisons on Subjective Wellbeing," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 128(1), pages 361-389, August.
    14. 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.
    15. repec:hal:spmain:info:hdl:2441/3ile1g7sqe8kfpi2d1e7jp82im is not listed on IDEAS
    16. Kaizhi Yu & Yun Zhang & Hong Zou & Chenchen Wang, 2019. "Absolute Income, Income Inequality and the Subjective Well-Being of Migrant Workers in China: Toward an Understanding of the Relationship and Its Psychological Mechanisms," IJERPH, MDPI, vol. 16(14), pages 1-27, July.
    17. Brown, Sarah & Gray, Daniel, 2016. "Household finances and well-being in Australia: An empirical analysis of comparison effects," Journal of Economic Psychology, Elsevier, vol. 53(C), pages 17-36.
    18. Adalgiso AMENDOLA & Roberto DELL'ANNO & Lavinia PARISI, 2015. "Happiness, Inequality and Relative Concerns in European Countries," CELPE Discussion Papers 136, CELPE - CEnter for Labor and Political Economics, University of Salerno, Italy.
    19. 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.
    20. Mohsen Javdani & Brian Krauth, 2020. "Job satisfaction and co‐worker pay in Canadian firms," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 53(1), pages 212-248, February.
    21. Li, Linyang, 2018. "Financial inclusion and poverty: The role of relative income," China Economic Review, Elsevier, vol. 52(C), pages 165-191.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    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:spr:soinre:v:179:y:2025:i:2:d:10.1007_s11205-025-03634-6. See general information about how to correct material in RePEc.

    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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.