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The Optimal Choice of a Reference Standard for Income Comparisons: Indirect Evidence from Immigrants' Return Visits

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  • Holger Stichnoth

Abstract

I propose two new tests of Falk and Knell's (2004) prediction that individuals' reference income increases with ability. To overcome the difficulty that the reference incomeis not observed in existing large data sets, I extend Falk and Knell's model to establish a link between immigrants' reference income and their return visits to their countries of origin. I derive the (arguably counter-intuitive) predictions that more educated immigrants are less likely to have returned to their country of origin for a visit, and that they are more likely to have difficulty feeling at home when they do return for a visit. Both predictions are confirmed on four waves of data from the German Socio-Economic Panel. The estimated marginal effects are statistically significant, but rather small in size.

Suggested Citation

  • Holger Stichnoth, 2010. "The Optimal Choice of a Reference Standard for Income Comparisons: Indirect Evidence from Immigrants' Return Visits," SOEPpapers on Multidisciplinary Panel Data Research 264, DIW Berlin, The German Socio-Economic Panel (SOEP).
    • Handle: RePEc:diw:diwsop:diw_sp264
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    Cited by:

    1. Akay, Alpaslan & Bargain, Olivier & Zimmermann, Klaus F., 2012. "Relative concerns of rural-to-urban migrants in China," Journal of Economic Behavior & Organization, Elsevier, vol. 81(2), pages 421-441.
    2. Julia Gelatt, 2013. "Looking Down or Looking Up: Status and Subjective Well-Being among Asian and Latino Immigrants in the United States," International Migration Review, Wiley Blackwell, vol. 47(1), pages 39-75, March.

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    Keywords

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    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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